Black rock launched a new bond ETF in Europe offering exposure to US dollar denominated corporate bonds from issuers domiciled in the Asia ex-Japan region.
The iShares $ Asia Investment Grade Corp Bond UCITS ETF (ASIG NA) has been registered on Euronext Amsterdam and comes to market with around $ 90 million in assets.
ASIG is linked to iBoxx USD Asia ex-Japan Corporates Investment Grade ESG Screened Index which consists of high-quality bonds with at least one year remaining and a minimum outstanding amount of $ 300 million.
To be eligible for inclusion in the index, a bond must have known cash flows, which include instruments such as fixed coupon bonds, zero coupon bonds, and redeemable and callable bonds. Floating rate bonds and bonds indexed to inflation and the like, among others, are explicitly excluded.
The index construction methodology leverages the capabilities of the ESG analysis firm Sustainalytics to eliminate proven violators of the principles of the United Nations Global Compact and issuers involved in serious ESG-related controversies or with commercial transactions related to controversial weapons, conventional weapons, tar sands, thermal coal and tobacco. .
The constituent elements are weighted by market value while capping each issuer at 4% upon rebalancing. The rebalancing is done monthly.
As of November 16, well over half (57.4%) of the index’s weighting was assigned to bonds from mainland Chinese issuers, with the second largest country exposure being Hong Kong SAR (10.5%) , South Korea (8.2%), India (4.6%), and Indonesia (4.3%).
The index is geared towards lower end of the spectrum investment grade bonds, with BBB rated issues accounting for 50.8% of the fund by weight and A rated issues contributing 42.2%. The remainder of the index is currently allocated to bonds rated AA.
Notable positions include Tencent (4.1%), Alibaba (3.0%), Pertamina Persero (2.9%), CNOOC Finance (2.1%) and CNAC HK Finbridge (1.8%).
The index currently returns 2.61% and has an effective duration of 5.22 years.
The ETF comes with an expense ratio of 0.20%, which is ten basis points cheaper than the $ 20 million Xtrackers USD Asia ex-Japan Corporate Bond UCITS ETF (ALQD LN), the only other ETF listed in Europe to target quality corporate bonds denominated in USD from the Asia ex-Japan region