State Street Global Advisors (SSGA) has launched the SPDR Barclays Global Aggregate UCITS ETF (SYBZ GR) in Europe, providing a single point of access for investors looking for globally diversified, investment grade fixed income exposure.
Stephen Yeats, managing director and head of EMEA and APAC fixed income beta solutions for SSGA.
The ETF has debuted on Xetra with listings on the London Stock Exchange and Borsa Italiana to follow.
The underlying Bloomberg Barclays Global Aggregate Index is one of the world’s largest and most liquid global fixed income indices, covering 94% of the investment-grade fixed income universe.
It tracks the performance of over 20,000 securities, from more than 2,400 issuers across 24 currencies in more than 70 countries.
The index provides aggregate exposure, incorporating treasury/government, government-related, corporate and securitized fixed-rate bonds from developed and emerging markets.
[pullquote]“An allocation to the global aggregate index offers investors one-stop-shop access to the global bond market.”
– Stephen Yeats, MD & head of EMEA and APAC fixed income beta solutions, SSGA[/pullquote]Stephen Yeats, managing director and head of EMEA and APAC fixed income beta solutions for SSGA, commented, “The extremely low yields in European bond markets make it compelling for European investors to seek access to a broader universe of yield dynamics outside their local region. An allocation to the global aggregate index offers investors one-stop-shop access to the global bond market.
“Used as the basis of a core fixed income allocation, or simply as a source of diversification from domestic bonds, an exposure to the Global Aggregate index may help increase diversification, result in lower volatility and deliver better risk-adjusted returns compared to other bond indices.”
“The global aggregate index is the benchmark of choice for a large proportion of institutional investors,” added Rory Tobin, global co-head of SPDR ETFs for SSGA. “Many large capital investors hold exposure to the index as a component of their strategic asset allocation, and increasingly we are seeing investors use global aggregate in more tactical ways, as a complement to more volatile strategies, to transition assets or as a liquidity sleeve.”
The index is currently yields 1.7% with an effective duration of 7.0 years. The US is the largest country exposure with 38.6% weight, followed by Japan (16.7%) and France (6.1%). The majority of securities in the index are treasury/government bonds (53.7%), with the next largest contributors being mortgage-backed securities (11.4%) and corporate – industrial (10.4%).
Looking at the credit profile, the majority of the portfolio comprises Aaa securities (39.7%), followed by A (26.9%), Baa (17.0%), and Aa (16.4%).
The ETF is physically replicated, using an sampling-based approach. Due to the vast number of securities in the index, it is impractical for the fund to hold all the index constituents.
Yeats explains, “Delivering the returns of the global aggregate in index form is complex given the extraordinary number of securities involved, but it is achievable with specialist skill and the global reach to trade effectively. Our portfolio managers in this strategy are 100 percent focused on tracking the index and understand the investible universe from all risk dimensions.”
Share classes hedged to US dollars, euros, pounds sterling and the Swiss franc will be available in the coming weeks.
The ETF has total expense ratio (TER) of 0.10% and will go into direct competition with the iShares Global Aggregate Bond UCITS ETF (AGGG LN) which was unveiled on LSE in November 2017. The iShares funds also charges a TER of 0.10% and has managed to accumulate almost $900 million assets under management since its launch.