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PIMCO Source ETF offers innovative exposure to emerging economies local government debt markets

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PIMCO and Source have launched the PIMCO Emerging Markets Advantage Local Bond Index Source ETF (EMLB), offering high quality, diversified exposure that is representative of the countries driving emerging markets growth.

 

Unlike many existing emerging market (EM) local debt indices, EMLB’s underlying index bases country allocation on national income (GDP) and a country’s capacity to service its debt. This results in significant allocation to key global economies, including China and India.
 
According to Chris Getter, Senior Vice President and Emerging Markets Product Manager at PIMCO, GDP weighting is particularly appropriate for global bond investing: “Unlike traditional debt market capitalisation indices, which reflect past patterns of issuance, PIMCO’s GDP weighting is forward-looking. It emphasises growing economies with strong fundamentals where there may be new opportunities.”

Many emerging market economies have stronger growth prospects and face fewer concerns about debt sustainability than their developed market counterparts, while at the same time offering higher yields.  Additionally, local currency bond markets are now larger and more liquid than external debt markets and offer potential for currency appreciation.
 
Commenting on the launch, Source CEO Ted Hood (pictured) says: “An emerging market benchmark without exposure to India or China is no longer a credible proposition. Through our partnership with PIMCO, we can deliver a product that marks a significant improvement on existing benchmarks for EM local debt”. 
 
This PIMCO Source ETF benefits from the performance of the EM Advantage index through physical investment and is fully transparent. Fund holdings are displayed on the Source website daily.  
 
The fund is registered for sale in Germany, Ireland, Luxembourg, Norway, Sweden and the UK and is in the process of being passported to Austria, France, Finland Italy (for institutional investors only) and the Netherlands.

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