Nomura launches US corporate bond ETF in Japan

Jun 28th, 2019 | By | Category: Fixed Income

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Japanese investment firm Nomura Asset Management has launched a new ETF on Tokyo Stock Exchange.

Nomura launches US corporate bond ETF in Japan

The fund provides currency-hedged exposure to investment grade, fixed rate corporate bonds denominated in US dollars.

The NEXT FUNDS Bloomberg Barclays US Intermediate Corporate Index (JPY Hedged) ETF (2554 JP) provides exposure to the investment-grade, fixed-rate, taxable corporate bond market while hedging currency exposure relative to the Japanese yen.

The fund is linked to a JPY-hedged version of the Bloomberg Barclays US Intermediate Corporate Index which includes US dollar-denominated securities issued by US and non-US industrial, utility, and financial issuers.

Eligible securities must have a remaining time to maturity between one and ten years.

The majority of the index weight is allocated to issuers from the US at 80.9%, with the next largest country exposures being the UK (6.1%) and Canada (2.8%).

Issuers at the lower end of investment-grade quality make up most of the index exposure with bonds rated ‘BBB’ and ‘A’ accounting for weights of 48.9% and 40.4%, respectively. Bonds rated ‘AA’ account for a further 8.7%.

The index currently has a yield-to-maturity of 2.9% and an effective duration of 4.3 years.

The fund comes with a management fee of 0.27% which is one basis point cheaper than the only other ETF listed in Japan targeting this space – the iShares USD Investment Grade Corporate Bond JPY Hedged ETF (1496 JP). This fund has ¥11.3 billion ($105 million) in assets under management and achieves its exposure by tracking the Markit iBoxx USD Liquid Investment Grade (JPY Hedged) Index.

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