GSAM cuts fee on Chinese government bond ETF

Jan 14th, 2021 | By | Category: Fixed Income

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Goldman Sachs Asset Management (GSAM) has reduced the total expense ratio on its Chinese government bond ETF.

GSAM cuts fee on Chinese government bond ETF

GSAM has cut the fee on its Chinese government bond ETF, Goldman Sachs Access China Government Bond UCITS ETF.

The Goldman Sachs Access China Government Bond UCITS ETF now has a fee of 0.24%, which is down from 0.35%.

The $138m fund is available across Europe with listings on the London Stock Exchange (CBND LN), Xetra (GASF GY), SIX Swiss Exchange (CBND SW), and Borsa Italiana (CBND IM).

The fund’s underlying reference benchmark is the FTSE Goldman Sachs China Government Bond Index, an index co-developed by Goldman Sachs that measures the performance of renminbi-denominated fixed-rate bonds issued by the Chinese treasury and regional Chinese governments.

Eligible bonds must have a minimum issue size of at least CNY 35 billion (this was increased from CNY 20bn last year) and at least one year remaining until maturity. The index is weighted by market capitalization and rebalanced monthly.

The fund tracks the index physically using a sampling technique. It was launched in October 2019.

Chinese government bonds offer an attractive yield – currently around 3% on a yield-to-maturity basis – and can provide additional geographical and currency diversification potential.

Yet despite this, Chinese assets remain significantly under-owned by global investors, something which is at odds with the fact that both the Chinese economy and its A-rated bond market are the second largest in the world.

This inconsistency is progressively shifting as major global bond indices, including prominent benchmarks from Bloomberg, JPMorgan, and FTSE Russell, move to incorporate Chinese bonds. Passive asset inflows linked to these inclusion activities have been estimated at over $300bn – a consideration that is likely to provide a positive tailwind for Chinese bond prices.

The reduced fee positions the fund as the lowest-cost product in the category. In terms of assets under management, however, the fund is well behind the category leader, the iShares China CNY Bond UCITS ETF (CNYB LN), which houses $6.7 billion in assets.

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