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Landsbref, one of Iceland’s leading fund management companies and a subsidiary of state-owned Landsbankinn, has unveiled the Landsbref LREAL ETF (LREAL), Iceland’s first ever fixed income exchange-traded fund (ETF).
The fund has been listed on Nasdaq OMX Iceland and enables investors to access a portfolio of Icelandic inflation-linked bonds in a single transaction.
Inflation-linked bonds are securities designed to help protect investors from inflation. Primarily issued by sovereign governments, these types of bonds are indexed to inflation so that the principal and interest payments rise and fall with the rate of inflation. Inflation-linked bonds may also offer additional benefits in a broader portfolio context, such as increased diversification and lower volatility.
The fund is linked to the Nasdaq OMX Iceland Inflation-linked Benchmark Bonds Index. This index, which was introduced by Nasdaq OMX Global Indexes in June this year, consists of inflation-linked government-guaranteed bonds listed and traded on Nasdaq OMX Iceland. To be eligible for inclusion bonds much meet certain liquidity criteria.
The inflation-linked bond market is an important asset class in Iceland. The total market capitalization of the index is between ISK 1,000 and 1,100 billion, which is between two and three times the market capitalization of nominal benchmark bonds.
Magnus Hardarson, Vice-President Nasdaq OMX Iceland, commented: “Nasdaq OMX Iceland has traditionally had a very strong bond market, so it is with great pleasure that we now welcome the first ever fixed income ETF on our market. I must also congratulate Landsbref for being the first issuer of this product, which undoubtedly strengthens the foundation of the Icelandic ETF segment.”
Sigthor Jonsson, CEO of Landsbref, added: “Landsbref has aimed at a leading role in exchange-traded funds on the Icelandic market. The new bond ETF we are now issuing supports our work in this direction, and earlier this fall we issued a new equity ETF. We expect to list further fixed income ETFs in the coming months and thereby further strengthen investor opportunities on the Icelandic fixed income market.”
Landsbankinn will act as a market maker to provide liquidity.