iShares, the Exchange Traded Funds (ETF) platform of BlackRock, Inc, has launched two funds on the London Stock Exchange (LSE), expanding its range of emerging market products across fixed income and equities.
These products meet the needs of investors searching for a steady stream of income available via the iShares Barclays Capital EM Asia Local Govt Capped Bond fund, and those looking for single country emerging market exposure through the iShares MSCI Mexico IMI Capped fund.
The iShares Barclays Capital EM Asia Local Govt Capped Bond fund is the first ETF in Europe to offer exposure to fixed rate government bonds that are issued by emerging market countries in Asia and denominated in their local currencies. It offers cost efficient and diversified access to a basket of bonds from countries including Thailand, South Korea, Philippines, Malaysia and Indonesia in a single trade. The fund is physically-replicating, with full transparency into the underlying bonds and has a total expense ratio (TER) of 0.50%.
To create the best outcome for investors and ensure liquidity and diversification, iShares worked closely with Barclays Capital to construct the index which the ETF tracks. This included introducing a cap so that no single country accounts for more than 40% of the index. In order to achieve best execution for investors, iShares has leveraged the expertise of BlackRock’s fixed income team in Singapore, who will handle the portfolio management and trading of the fund.
The iShares MSCI Mexico IMI Capped fund is physically-replicating and provides exposure to the largest and most liquid stocks in the market. A cap is applied to ensure no single group entity accounts for more than 30% of the index. The fund has a TER of 0.65%.
Axel Lomholt (pictured), Head of iShares Product Development EMEA, says: “European investors are continuing to search for new sources of yield, and new ways in which they can secure sustainable income streams. Asian debt markets have grown steadily over the last ten years, and bonds denominated in local currencies provide a different yield and risk profile to US dollar denominated debt, allowing investors to diversify their fixed income holdings. As this hunt for yield continues, we are seeing significant interest in fixed income ETFs from professional investors looking for efficient and cost effective ways to construct a portfolio.
“We have also built out our emerging markets range to offer new opportunities to access growing markets at a country and regional level efficiently. Our US domiciled Mexico ETF has gathered approximately USD1 billion to date, and we believe UK investors will find the new LSE-listed fund a valuable asset allocation tool.”