EUROPE - Barclays Global Investors is to introduce Europe's first ever corporate bond exchange traded fund next week.
The fund named iBoxx ELiquid Corporates will start trading on March 19, with E750m of capital, on the XTF segment of the Deutsche Börse where some 45% of European ETF trading is conducted.
It will give investors access to a basket of 40 investment-grade bonds constituting the iBoxx E Liquid Corporates Index, at a total expense ratio of 0.2%.
The ETF will target both institutional and individual investors and is expected to deliver 4.44% gross yield per annum.
Barclays Capital, Credit Suisse First Boston and Dresdner Kleinwort Wasserstein (DrKW) will act as market makers.
David Mark, CEO of iBoxx, said: We are confident that European investors will welcome this collaboration between iShares and iBoxx, which offers them a multi-faceted, liquid, flexible bond product.
“This new product validates the iBoxx goal of setting new standards of transparency and accessibility in the bond market.
iBoxx, the corporate bond index provider, is a consortium of 7 investment banks - ABN AMRO, Barclays Capital, BNP Paribas, Deutsche Bank, DrKW, Morgan Stanley and UBS Warburg - and the Deutsche Börse. iShares is the brand name for BGI’s ETF vehicles.
BGI is already a big player in the ETF market, with 25% of global assets under management and 45% of listed ETFs worldwide. iShares fixed income ETFs were the first bond ETFs to be launched in both Canada (2000 ) and in the US (2002).
An ETF is a single share that gives investors exposure to an entire stock market and specific sectors or regions. Shares can be bought and sold for cash, similar to shares in an investment trust or mutual fund. But unlike a mutual fund, for example, components are disclosed on a daily basis.
ETFs are often touted as cost-effective alternative to futures, OTC derivatives and notes - vehicles that are often restricted in pension fund investment.
Most investors use the tool for hedging, equitising cash or as part of style-play.
Since their launch in 1993, ETFs have grown to over 280 funds globally, trading in 17 countries, according to figures from Morgan Stanley.
During 2002, assets under management in Europe rose 91% from E4.65bn to E9.77bn.
But since then worldwide ETF growth has dipped to US$131.8bn assets under management at the end of February 2003 from US$141.2bn at the end of 2002.
Assets under management have remained flat for ETFs listed in Europe during the same periods (US$10.69bn to US$10.65bn) and in Japan (US$21bn to US$20bn). While US listed assets under management have declined by 9.1% during this period to US$10.65bn.
*The first exchange traded fund (ETF) on a fixed income index in Europe is now trading, also in the XTF segment of Deutsche Börse.
The ETF eb.rexx Government Germany EX is issued by IndEXchange and tracks the Eurex Bonds Government Germany index, comprising the 25 most liquid German government bonds on the Eurex Bonds trading platform.
Earlier this month, UBS Global Asset Management also launched Fresco Bees ETFs, the B class of shares tailored to the needs of European institutional investors, on Euronext Paris. Fresco Bees will be supported by BNP Paribas, Exane, JPMorgan, Optiver and Timber Hill as market makers and liquidity providers.
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