Deutsche launches Asian bond ETF first

Deutsche Asset Management’s db X-trackers platform has launched what it has called the world’s first exchange-traded fund providing exposure to the Asia ex-Japan US dollar corporate bond market.

The db x-trackers II iBoxx USD Liquid Asia Ex-Japan Corporate Bond UCITS ETF (DR) has listed on the Deutsche Börse and is due to list on the London Stock Exchange next week, the compnay said in a statement. The ETF tracks an index currently composed of 148 investment-grade corporate bonds from nine countries.

“Asia US dollar investment-grade corporate bond issuance increased from around US$21bn in 2010 to around US$63bn dollars in 2015,” said Anson Chow, Deutsche AM’s head of exchange traded product development, Asia-Pacific. “This is an important and growing section of the global bond market, and this new ETF provides investors with a flexible and efficient way to access such exposure.”

The ETF’s underlying index is the Markit iBoxx US$ Liquid Asia Ex-Japan Corporates Large Cap Investment Grade Index. Only bonds with over US$750m in outstanding notional qualify for inclusion in the index, which has a yield of 3.10%, average duration of 5.03 years, and average credit quality of ‘A-’, Deutsche AM said.

‘Higher volatility-adjusted return’

“It’s interesting to observe that over the past three years the Asia investment-grade corporate bond market has generally shown a higher volatility-adjusted return compared to the US IG corporate universe,” added Chow. “And that in the past 10 years there have been no defaults in the bonds included in the index underlying this ETF.”

As of 31 August, 2016, Chinese corporate bonds represent the highest weighting in the index, at slightly more than 50%. Corporate bonds from Hong Kong and India both have weightings of more than 10%. This is consistent with Greater China and India representing over 70% of the GDP of the Asia ex-Japan region. Other countries represented in the index are Malaysia, Indonesia, Singapore, Thailand and South Korea,” Deutsche AM said. The ETF has an annual ‘all-in’ fee of 0.30%.

Deutsche AM’s db x-trackers platform has an extensive range of fixed income ETFs, including the db x-trackers Barclays USD Corporate Bond UCITS ETF (DR), which is a physical replication ETF tracking the predominantly US corporate bond market. The ETF launched in October 2015 and has already attracted more than US$550m in assets under management, according to company statistics.

Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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