GSAM launches smart beta 1-5 year corporate bond ETF

Jul 13th, 2020 | By | Category: Fixed Income

Goldman Sachs Asset Management (GSAM) has expanded its range of fixed income ETFs with the launch of a new fund providing smart beta exposure to the corporate bond market.

GSAM launches smart beta corporate bond ETF

Goldman Sachs has launched a new ETF providing smart beta exposure to investment-grade corporate bonds.

The Goldman Sachs Access Investment Grade Corporate 1-5 Year Bond ETF (GSIG US) has listed on NYSE Arca and comes with an expense ratio of 0.14%.

Michael Crinieri, GSAM’s Global Head of ETF Strategy, commented, “We continue to build out our suite of fixed income ETF products, working closely with our clients and index providers.

“The addition of GSIG to our Access suite aims to provide investors an attractive option to get simple, transparent, and liquid access to the investment-grade credit market in a competitively priced vehicle backed by the global platform and resources of Goldman Sachs.”

The fund tracks the FTSE Goldman Sachs US Investment-Grade Corporate Bond 1-5 Years Index with trade execution and portfolio optimization being managed by GSAM’s Global Fixed Income team.

The index consists of investment-grade corporate bonds denominated in US dollars with remaining maturities between one and five years. Fixed-rate, fixed-to-floating, and zero-coupon bonds are all eligible for inclusion as long as they have an issue size of at least $250 million.

The methodology uses a smart beta screen to minimize exposure to issuers showing certain signs of deterioration.

Issuers are grouped into financials, industrials, and utility industry groups and ranked using an equally weighted measure of two fundamental factors – operating margin and leverage. Those ranking in the lowest 10% of each industry group are excluded.

The constituents are then divided into two maturity buckets – 1-3 year bonds and 3-5 year bonds. Constituents are weighted by market value within each bucket while using a single-issuer cap of 5%.

The weight of each bucket is also altered so that the effective duration of the index matches that of the 1-5 year sub-set of bonds within the parent FTSE US Broad Investment-Grade Corporate Index. Reconstitution and rebalancing occur on a monthly basis.

GSAM also offers the same smart beta strategy on broad investment-grade and high-yield corporate bond markets via the $530m Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB US) and $70m Goldman Sachs Access High Yield Corporate Bond ETF (GHYB US). The funds come with expense ratios of 0.14% and 0.34%, respectively.

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