Satrix has become the latest local issuer to launch an exchange-traded fund (ETF) tracking a global bond index. The Satrix Global Aggregate Bond ETF listed on the JSE on Wednesday, and will act as a feeder fund into the iShares Core Global Aggregate Bond Ucits ETF, which tracks the Bloomberg Barclays Global Aggregate Bond Index.
This is the third global bond ETF to list locally, in addition to the Ashburton World Government Bond ETF and the 1nvest Global Government Bond Index Feeder ETF. All three track different indices.
The Ashburton fund tracks the FTSE World Government Bond Index (WGBI), which includes investment-grade sovereign bonds from both developed and emerging countries. The 1nvest product tracks the Citigroup Group-of-Seven (G7) Index, and is therefore strictly a developed market government bond index.
The Bloomberg Barclays Global Aggregate Bond Index, which the new Satrix offering follows, is similar in its geographical coverage to the WGBI, but is not limited to sovereigns. It also includes investment-grade government-related, corporate and securitised bonds. It is therefore the broadest of the three.
‘Allocating to global bond markets gives investors exposure to an asset class which is a natural complement to global equities, and can play a significant role in diversifying a portfolio,’ said Satrix. ‘Global bonds provide exposure to a much greater and more broadly diversified number of interest-bearing securities across a wider range of markets and economic environments.’
The Bloomberg Barclays Global Aggregate Bond Index only includes investment-grade bonds, with at least one year to maturity. The allocations in the index are weighted according to market size.
The largest individual exposures are to US and Japanese government bonds. The index also includes a significant weighting to other US-based debt, including mortgage-backed securities, and corporate credit.
According to statistics from iShares, the iShares Core Global Aggregate Bond Ucits ETF has 5,953 constituents, with an effective duration of 7.1 years. The weighted average maturity is 8.8 years.
The fund will make distributions twice a year, and the current distribution yield is 1.52% in US dollars.
In total, the index has returned just under 4.2% per annum in dollar terms over the past five years. That equates to a 10.6% annualised return in rand.
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In a note announcing the listing, the JSE stated that the total market capitalisation of ETFs on the local exchange has now surpassed R100bn. A total of 76 ETFs are now listed on the JSE’s main board.
‘ETFs have very humble beginnings but in the past 20 years of the JSE listing them, they have evolved and grown, with increasing interest as ideal investment options,’ said Valdene Reddy, Director of Capital Markets at the JSE. ‘As a result, close to R600m in ETF value is traded on the JSE daily, while the local ETF market has seen a compounded annual growth rate of 20% since the first listing.’