WisdomTree Investments, the New York-based ETF sponsor with over $20 billion in assets under management and known for its fundamentals-focused funds, has rolled out an actively managed global corporate bond ETF to be sub-advised by Western Asset Management Company (Western Asset).
The WisdomTree Global Corporate bond Fund (GLCB) is one of the first funds that blend a diverse portfolio of both developed and emerging market corporate debt with an aim to maximize total return through coupon income and capital appreciation.
GLCB invests in both dollar and non-dollar denominated investment grade and high-yield securities issued by private, public and state-owned or sponsored corporations from around the world, including the US. The fund will invest at least 80 percent of net assets, plus the amount of any borrowings for investment purposes, in corporate debt. Corporate debt includes fixed income securities such as bonds, notes, money market instruments and loan participation notes.
Investors across the globe use corporate bonds to generate income, diversify portfolios and reduce risk. The universe of non-US corporate bond includes 2761 issuers and $11.2 trillion in total debt and empirical study suggests non-US corporate debt provides diversification benefits within corporate bond portfolios. An active management strategy helps exploit market inefficiencies through disciplined credit research and reduces risks compared to exposures in US credit markets alone.
The fund intends to invest in corporate debt denominated in both US and local currencies. To mitigate exchange rate risks that are typically associated with foreign currency assets, GLCB intends to hedge foreign currency exposure in non-US denominated debt back to US dollars. To achieve this, it may invest up to 20 percent of net assets in derivative instruments such as swaps and forward currency contracts. The fund may also invest in debt securities linked to foreign-currency inflation rates.
To manage interest rate risks, GLCB aims to maintain an aggregate duration of two to 10 years. Aggregate portfolio duration is an important gauge of the fund’s sensitivity to interest rate changes and higher durations generally translate into greater interest rate risks.
The fund seeks to hold at least 55 percent of assets in investment-grade securities, with the option to invest in US and international high yield and emerging market corporate bonds. GLCB must, however, invest at least 80 percent of net assets in corporate debt.
The fund has a net expense ratio of 0.45 percent and is listed on the NASDAQ market. With this ETF being brand new, there is no track record as far as prices and dividends are concerned. I will revisit GLCB at some point in the future.
Disclosure: No holdings
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