ETF NEWS - ULTUMUS

Debt, Debt and more Debt

Written by Ultumus | 6 October 2017

USA

Columbia lists complex debt ETF with truly global ambitions

Columbia Threadneedle is listing a multi-strategy fixed-income ETF that sets a new frontier for complexity in debt-tracking ETFs.

The Columbia Diversified Fixed Income Allocation ETF (DIAL) will track debts from several sectors of the global debt market. They include: T-bills; global ex-US treasuries; US mortgage-backed securities; US investment grade corporate bonds; US corporate junk bonds; emerging market sovereign and quasi-sovereign debt.

While each sector has a fixed weighting, specific debts will be chosen based on yield, quality, and liquidity, the prospectus says. How much weighting each sector will get is not specified in the prospectus.

To qualify in the index, debts from each sector must meet the following criteria:

T-bills:

Have 7+ years remaining maturity and have $250+ million outstanding face value.

Global ex-US treasuries:

Have 7-12 years remaining maturity and yields greater than zero. Only debts from Australia, Canada, France, Germany, Great Britain, Italy, Japan, New Zealand, Norway, Sweden, and Switzerland will be considered.

Mortgage-backed securities:

Come from government-backed institutions and have "an issuance date not greater than 1,000 days", the prospectus says.

Investment grade corporate bonds:

Have 5 - 15 years remaining maturity, be investment grade, $250+ million par outstanding.

Corporate junk bonds:

Have $800+ million outstanding and less than 14 years remaining maturing. Issuers are capped at 2%, the prospectus says, presumably to limit risk.

Emerging market debts:

Have 5 - 15 years remaining maturity, and $2+ billion outstanding. Each country’s weight is capped at 10%, the prospectus says.

Australia

Vanguard also lists global debt ETF, but much more straightforward

Vanguard will be listing a new fixed income ETF on the Australian Stock Exchange this month, the Vanguard Global Aggregate Bond Index Fund Hedged ETF (VBND).

As its name suggests, VBND will invest in bonds from around the world. According to the factsheet, these bonds are mostly sovereign bonds rated BBB- or higher. The main sovereigns being tracked will be the United States, Japan and France. Vanguard has listed products which track this index and hedge into the local currency in other countries as well.

Vanguard is one of the fastest growing ETF issuers in Australia. According to a report from Aussie robo-advisor Stockspot, Vanguard grew its assets by 42 percent in 2016. This put its growth rate well ahead of BlackRock, which remains the biggest issuer in Australia (and almost everywhere else) by AUM.