iShares launches Morningstar $ Emerging Markets Corporate Bond ETF (EMCP)

Apr 19th, 2012 | By | Category: Fixed Income

iShares, the ETF platform of BlackRock, has listed the first ETF in Europe to provide access to emerging market corporate bonds denominated in US dollars.

iShares launches Morningstar $ Emerging Markets Corporate Bond ETF (EMCP)

iShares, the ETF platform of BlackRock, has rolled out the iShares Morningstar $ Emerging Markets Corporate Bond ETF (EMCP).

The iShares Morningstar $ Emerging Markets Corporate Bond ETF (EMCP), which has been listed on the London Stock Exchange (LSE), provides broad and diversified exposure to US dollar-denominated debt issued by corporates based in emerging market countries in Latin America, Eastern Europe, the Middle East, Africa and Asia.

The fund’s benchmark, the Morningstar Emerging Markets Corporate Bond Index, has been specifically designed to ensure liquidty and investability by including various liquidity screens and a cap on any single issuer of no more than 5% of the fund.

At inception the fund had an average credit rating of BBB+, a maturity of 7.71 years and a yield to maturity of 5.06%. Major names include Petrobras of Brazil, Gazprom and Russian Agricultural Bank of Russia, PDVSA of Venezuela and KazMunaiGas of Kazakhstan.

The amount of dollar-denominated debt issued by emerging market corporates has increased dramatically in the last decade. Corporates issued $188bn of bonds in 2011, more than twice the level of debt issued by emerging market governments in dollars. As issuance has grown, credit quality has improved, liquidity has increased and the opportunity set for investors has expanded accordingly.

A US-domiciled version of the fund, the iShares Emerging Markets Corporate Bond ETF (CEMB), has been listed simultaneously on the BATS Exchange. Both funds will be managed by iShares’ fixed income team in San Francisco to leverage local expertise.

The launch comes as investors increasingly recognise the value of taking a passive approach to fixed income, and reflects demand for a greater choice of exposures within the asset class.

Commenting on the launch, Axel Lomholt, Head of iShares Product Development EMEA, said: “Emerging market corporate bonds provide an opportunity over the long term to capture the next stage in the growth and development of these countries. This area of fixed income offers investors the potential for attractive total returns as well as a strong income stream, and our new ETF is the first of its kind in Europe to deliver this exposure in a single, cost-efficient trade. As interest in fixed income ETFs continues to grow, we will expand our product range further with high quality funds that deliver transparent and liquid access to areas of the market.”

The fund has a Total Expense Ratio (TER) of 0.50% pa.

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