UBS Asset Management has unveiled an exchange-traded fund providing investors with access to emerging markets sovereign debt. Listed on the London Stock Exchange, the UBS ETF (LU) Barclays USD Emerging Markets Sovereign UCITS ETF delivers exposure to sovereign and quasi-sovereign bonds from more than 60 emerging markets countries.

Andrew Walsh, Head of ETF Sales for UK & Ireland at UBS Global Asset Management.

The ETF is linked to the Barclays Emerging Markets USD Sovereign & Agency 3% Country Capped Index, an index which currently comprises more than 100 securities.

The index is market capitalization-weighted index and tracks fixed and floating-rate US dollar-denominated debt issued by sovereign and agency EM issuers. Corporate issues are not eligible. Country weights are capped at 3% of total amount outstanding of all eligible issues. The EM USD Sovereign & Agency 3% Country Capped Index is a subset of the flagship EM USD Aggregate Index.

Index constituents are denominated in US dollars as opposed to the respective local currencies. Country restrictions are used in order to guarantee a representative investment in sovereign emerging markets at global level: investments in a single emerging market country may not exceed 3% of the index. Furthermore, illiquid market segments are removed at the index level via a stringent liquidity filter. This provides investors with transparent and flexible access to emerging markets government bonds.

Commenting on the launch, Andrew Walsh, Head of UBS ETF Sales for UK & Ireland, said: “The addition of the UBS Barclays USD Emerging Markets Sovereign UCITS ETF continues our expansion in the fixed income space and offers our clients a simple way to access USD-denominated government debt issued by emerging economies with competitive pricing. The underlying index the ETF tracks provides a more balanced set of country weightings than an un-capped index of this sort. For example, countries such as Turkey, Indonesia, Russia and Mexico would normally have weights in the high single-digits, but our ETF will only have a 3% maximum exposure to such countries’ debt issuance. Conversely, smaller EM sovereign issuers such as Chile, Uruguay and Sri Lanka will have higher relative weights than they would have in an uncapped index.”

The ETF has an annual management fee of 0.42%.