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UBS Asset Management launches new short-term emerging market bonds ETF

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UBS Asset Management (UBS AM) has launched UBS ETF (LU) JP Morgan USD EM Diversified Bond 1-5 UCITS ETF, which tracks the JP Morgan USD Emerging Markets Diversified 3 per cent capped 1-5 Year Bond Index.

This ETF gives investors access to emerging market Sovereign bonds, quasi-Sovereigns and corporate bonds with remaining maturity of between one and five years in a simple and cost-efficient manner.  It is aimed at delivering a yield pick-up relative to developed market fixed income exposures. As well as exposure to a large range of bonds, the ETF allows for broad geographical diversification across more than 60 countries.
 
The bonds contained in the index are exclusively denominated in US dollars. It includes both fixed and floating rate securities with amounts outstanding in excess of USD500 million. Country weights are capped at 3 per cent to reduce single country concentration.
 
The underlying index contains selected short-term, liquid and higher credit quality securities from the flagship indices of JP Morgan CEMBI Broad Diversified (corporate bonds) and JP Morgan EMBIG Diversified (Sovereign and quasi- Sovereign bonds). For Sovereigns, only bonds issued from EM countries with Gross National Income per capita below the index income ceiling (IIC) for three consecutive years will be eligible. An eligible corporate issuer must meet one of the following criteria: headquartered in an EM country, or 100 per cent of the issuer’s assets are within EM economies, or issuer must have 100 per cent secured assets within EM economies.
 
Simone Rosti, Head of Passive & ETF Specialist Sales Europe at UBS Asset Management, says: “With this launch, UBS Asset Management is reinforcing its fixed income product suite by offering investors the opportunity to invest in this distinct emerging market asset class. This is the first ETF to blend together EM sovereign and corporate bonds targeting short duration. It also uses a 3 per cent country capping which is shown to deliver a better risk return profile compared to uncapped EM fixed income indices.”

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