WisdomTree Investments, an ETF firm known for its
fundamentals-focused indexes, today rolled out an actively managed
global corporate bond ETF that would be one of the first funds to
serve up a diverse portfolio of blended developed and emerging
market corporate debt.
The WisdomTree Global Corporate Bond ETF (NasdaqGM:GLCB), which
is designed to generate return income as well as capital
appreciation, invests in dollar- and nondollar-denominated
investment-grade and high-yield debt securities from public,
private, state-owned or -sponsored issuers around the globe. GLCB
has a net annual expense ratio of 0.45 percent, or $45 per $10,000
New York-based WisdomTree's latest addition has not only managed
to comprise in one wrapper what other providers have packaged in
several strategies, but is also the first actively managed global
corporate bond fund. The launch comes at a critical juncture in
fixed-income markets. Rates may be on the verge of normalizing to
higher levels than they have been since the 2008 market collapse,
and active management could turn out to be an ace in the hole as
prices on existing bonds drop amid rising rates.
Among WisdomTree's competitors are iShares-which has some 20
in the corporate bond segment. While most of those funds are
focused on U.S. debt, the San Francisco-based ETF sponsor also
offers the iShares Global High Yield Corporate Bond Fund
(NYSEArca:GHYG), the iShares Emerging Markets Corporate Bond Fund
(NYSEArca:CEMB) as well as an international preferred stock
Corporate bonds have gained favor with investors looking for
income at a time when yields are compressed in the other areas of
the bond markets, and WisdomTree is hoping GLCB will become a core
fixed-income holding in investors' portfolios.
"There is a much wider opportunity set in corporate bonds when
investors do not restrict themselves to U.S. issuers-a global
universe now features 2,761 issuers and $11.2 trillion in overall
debt," the company said in a statement about GLCB that was
published on its website.
"Active management offers the potential to exploit certain
market inefficiencies through disciplined credit research and
active risk oversight to manage portfolios through credit cycles,"
The fund could expose investors to currency-related risk,
something WisdomTree is looking to mitigate by hedging that
currency exposure of non-U.S.-denominated debt back to U.S.
To manage interest rate risk, the portfolio will have an
aggregate duration of two to 10 years. Duration is a measure of a
fixed-income security's sensitivity to changes in interest rates or
the interest rate outlook-the shorter the duration, the less
sensitive a portfolio is to changes in interest rates.
The weight of a single issuer will be capped at 10 percent of
the fund's net assets, and a single country may represent as much
as 30 percent of the mix. The exception here is the U.S., which may
represent as much as 70 percent of the mix at any given time.
From a regional perspective, as much as 25 percent of the
portfolio could be allocated to emerging market debt.
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