Van Eck Files For Active China Bond ETF

Van Eck Global, the money management firm that filed to offer an indexed-based China bond ETF in late July, filed new paperwork with the Securities and Exchange Commission to bring to market another China-focused bond ETF, this one managed actively.

The advisor of the Market Vectors Yuan Bond ETF will use a range of qualitative and quantitative factors designed to identify securities that are desirable on a relative value basis, the paperwork said. Conversely, the Market Vectors Dim Sum Bond ETF put into registration in July will be based on the “Dim Sum Bond Index,” a proprietary benchmark developed by New York-based Van Eck.

But both ETFs will effectively be cherry-picking securities from the same corner of the investment universe. Both will target Chinese yuan-denominated debt obligations issued outside of mainland China by Chinese or non-Chinese issuers, including corporations, governments, and government and supranational agencies, according to both registration statements.

Van Eck’s plans serve as perfect active-to-passive bookends to what is clearly turning out to be a marketing frenzy of China bond ETFs. Guggenheim has first-to-market bragging rights with a rollout this morning of an index-based yuan fund, but just barely. Indeed, PowerShares plans to roll out an indexed “Dim Sum” bond ETF of its own on Friday, Sept. 22. Also, WisdomTree and San Francisco-based ETSpreads also have their own China bond ETFs in the works.

The trend began with funds focused on emerging markets debt denominated in local currencies as investors looked to play high-growth economies in a new way. The leader in that space, the WisdomTree Local Currency Debt Fund (NYSEArca:ELD), has $1.37 billion in assets, making it the fifth-largest international fixed-income ETF, according to data compiled by IndexUniverse.

The quick success of the WisdomTree Asia Local Debt Fund (NYSEArca:ALD), launched in March, seemed to open the door to the ETF marketing mania focused on China. ALD has gathered more than $650 million in assets in about six months.

Like the passively constructed fund Van Eck has in the works, it said in the latest regulatory filing that the Dim Sum bonds in the active ETF it is planning can have any maturity and may include debt obligations that are unrated or, if rated, are considered to be investment grade or below investment grade.

It didn’t provide a planned ticker or a proposed expense ratio for the active fund.


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