Satrix Managers has launched the first global aggregate bond ETF in South Africa, providing investors with comprehensive fixed income exposure in a single ticker.
The fund is the first ETF in South Africa to provide global aggregate bond exposure.
The Satrix Global Aggregate Bond ETF (STXGBD SJ) has listed on the Johannesburg Stock Exchange and comes with a targeted annual total expense ratio of 0.45%.
The fund is effectively structured as a feeder fund, investing its assets in BlackRock‘s European domiciled iShares Core Global Aggregate Bond UCITS ETF which houses roughly $4.4 billion in assets under management.
The underlying iShares ETF is linked to the Bloomberg Barclays Global Aggregate Index which offers broad and diversified exposure to investment-grade bonds across multiple sectors and segments from both developed and emerging market issuers.
The index covers a universe of over 23,000 investment-grade bonds issued by governments, corporates, and agencies. It currently yields 0.84% and has an effective duration of 7.1 years.
Government bonds account for over half (55.4%) of the index, followed by corporate bonds (17.0%) and mortgage-backed securities (11.0%).
The largest individual issuers are the US Treasury (15.7%), the government of Japan (14.2%), Uniform MBS (Freddie Mac and Fannie Mae) (3.4%%), the Republic of France (3.4%), and the UK government (3.3%).
In terms of credit quality, the largest allocation (36.6%) is to AAA-rated bonds, followed A-rated (28.4%), BBB-rated (15.8%), and AA-rated (15.1%) bonds.
As the Satrix ETF trades in South African Rand, the fund will be significantly exposed to exchange rate risk with the index’s largest currency exposures currently being the US dollar (42.8%), euro (24.2%), Japanese yen (14.3%), Chinese yuan (5.2%), and pound sterling (4.9%).
Foreign currency exposure would have significantly benefitted the ETF this year as the South African rand has weakened considerably during the Covid-19 market environment – the index has returned 6.3% year-to-date (31 July) in US dollar terms but has soared 29.4% when calculated in rand.