FinEx launches Russia’s first ETF on Moscow Exchange

Apr 29th, 2013 | By | Category: Fixed Income

FinEx has launched Russia’s first ever locally listed exchange-traded fund (ETF), the FinEx Tradable Russian Corporate Bonds UCITS ETF (FXRB). The fund has been listed on the Moscow Exchange and provides exposure to shorter maturity liquid Eurobonds issued by Russian non-sovereign issuers.

FinEx launches Russia’s first ETF on Moscow Exchange

Simon Luhr, Managing Partner and CEO of FinEx Capital Management, ringing the opening bell at Moscow Exchange.

The Moscow listing, which comes just two months after the fund debuted on the Irish and London stock exchanges, will appeal to Russian-based investors seeking convenient access to a liquid diversified domestic corporate bond portfolio.

The fund is linked to the Barclays EM Tradable Russian Corporate Bond Index. Securities issued by domestic Russian quasi-sovereign and corporates are eligible for the index, with a maximum of three bonds per issuer. Issuer caps and floors are applied to enhance diversification. Duration of the bonds ranges from 18 months to five years.

The launch is yet another landmark for the global ETF industry, which recently recorded its best first quarter on record, amassing inflows of $70.1 billion. Globally, assets under management within exchange-traded products stand at more than $2 trillion, but only a fraction of this is held in products listed in emerging markets. This looks set to change, with significant growth expected in emerging markets such as Russia.

Simon Luhr, Managing Partner and CEO, FinEx Capital Management, said: “Today’s launch on the Moscow Exchange is the beginning of a new era for Russian investors, and a very exciting time for FinEx. Although globally ETFs have enjoyed huge growth in recent years, the phenomenon has a long way to go in many emerging markets globally.”

Evgeny Kovalishin, President and CEO FinEx Plus, one of the fund’s authorised participants, added: “ETFs are ideally suited to Russia, as their key attributes of transparency, efficiency and liquidity are of high importance to Russian investors, particularly transparency. We strongly believe that the Russian ETF market is set to soar.”

Moscow Exchange joins other early adopters within the emerging markets sphere to list ETFs, including, among others, Brazil’s Bovespa, Chile’s Santiago Stock Exchange, China’s Shanghai Stock Exchange and Malaysia’s Bursa Malaysia.

Alexander Afanasiev, Chairman of the Executive Board and CEO, Moscow Exchange, said: “The entrance of the first ETF on to the Moscow Exchange signals an important step in the development of financial infrastructure in Russia. The launch of this type of global product contributes to the establishment of Moscow as an international financial centre.”

Similarly, Joseph F. Keenan, Head of Global ETF Services at BNY Mellon, the fund’s custodian and administrator, added: “Russia is an enormous untapped market for ETFs and it is highly likely we will see accelerated development of ETFs that offer investors greater exposure to Russian securities over the next 12 months.  While we believe the most likely ETFs to emerge this year will be equity-based, in time, we would also expect Ruble-denominated fixed income exchange traded products and a greater range of commodity and real estate exchange-traded products in the near term.”

The fund is synthetically replicated and comes with a total expense ratio of 0.95%. The base currency is US dollar, but trades in Rubles.

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