Fri, 26/04/2013 - 06:00
SPDR ETFs, the exchange-traded funds platform of State Street Global Advisors (SSgA), has launched the SPDR Barclays EM Inflation-Linked Local Bond UCITS ETF on the Deutsche Börse.
It is the first exchange-traded fund giving pure exposure to EM inflation-linked debt.
The new physically-backed ETF tracks the Barclays EM Inflation-Linked 20 per cent Capped Index, which includes inflation-linked sovereign bonds issued by Brazil, Mexico, Chile, South Africa, Poland, Turkey, Israel, Korea and Thailand.
New SPDR ETF research reveals that most asset managers and pension professionals across Europe now invest in emerging market debt and that almost half (47 per cent) plan to increase that allocation over the next three years. The data shows that the key drivers for this increased allocation are the benefits of diversification (49 per cent) and the superior yields that EM bonds offer over developed market debt (40 per cent). The research also showed that inflation is a concern for the pension professionals and asset managers, with 75 per cent of respondents expecting global inflation to rise in the next one to three years and nearly 70 per cent believing that it will be higher in emerging markets than in developed.
Scott Ebner, global head of product development for SSgA, says: “The SPDR Barclays EM Inflation-Linked Local Bond UCITS ETF gives investors simplified access to a diversified portfolio of local currency inflation-linked bonds for the very first time. Investors are increasingly looking for ways to diversify their emerging markets exposure beyond traditional equity allocations and are cognisant of prospective inflationary pressures. This new launch is the latest example of SSgA’s leadership in providing simple solutions for European investors to difficult segments of the fixed income market and an extension of the spirit of innovation that has been part of our global SPDR ETF business for over 20 years.”
The market for EM linkers has grown strongly over the past 10 years, with the number of issuers doubling and the number of issues increasing threefold. The total market now stands at almost USD600bn, approximately the same size as the hard currency emerging markets government universe, giving it sufficient size, depth and liquidity for an indexed approach to investment.
Attractive growth opportunities and concerns about inflation have been two traditional hallmarks of emerging market economies, and whilst the former has been relatively easy to access for investors through EM equity and more recently EM debt, direct access to inflation-linked bonds has been more difficult for many. Only 19 per cent of respondents to the SPDR ETF research said that they currently found it easy to access emerging market inflation-linked bonds.
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