Lombard Odier Investment Managers and ETF Securities launch emerging market local government bond ETF

Lombard Odier Investment Managers, a pioneer in smart beta fixed income investing, and ETF Securities, one of the world’s leading, independent providers of Exchange Traded Products, have today listed their emerging market local government bond ETF on the London Stock Exchange…….

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Fund name  ISIN  TER (p.a.) 
ETFS Lombard Odier IM Emerging Market Local Government Bond Fundamental GO UCITS ETF IE00BSVYHP04 0.55%

This fourth addition to the range of fundamental, fixed income ETFs, is designed to provide exposure to local government currency debt of emerging markets and developing countries(1), using fundamental factors that assess issuers’ creditworthiness to identify those that we believe are best-placed to repay their debt.

Today, emerging sovereign bonds offer an appealing yield-to-maturity as interest rates in advanced economies are likely to remain low for longer. In addition, unlike market-cap benchmarks, which reward the most-indebted borrowers, our fundamental focused approach is designed to deliver quality-based diversification and includes exposure to India and China (the two largest emerging market countries).

Kevin Corrigan, Head of Fundamental Fixed Income, Lombard Odier IM commented:

“We are extremely pleased to introduce our emerging market local government bond ETF to the European market. As interest rates in advanced economies remain depressed, relative valuation dynamics in emerging market debt are becoming interesting and our fundamentally weighted approach provides greater quality-focused diversification for investors. Lombard Odier IM has over five years of experience in fundamentally-weighted fixed income investing and our partnership with ETF Securities enables us to offer a wide range of investors an innovative approach to investing in emerging debt markets.”

Howie Li, Co-Head of CANVAS, ETF Securities added:

“The suite of ETFs that we have brought to the market with Lombard Odier IM aim to capture the increasing shift towards more cost-effective investment solutions but, at the same time, provide an improved risk-adjusted return profile. Our first three products, launched in April, were well received and investors have already expressed their interest in the launch of this innovative emerging market ETF. With bond liquidity increasingly being a source of concern, investors in ETFs have extra liquidity support from the secondary market to help mitigate this. This liquidity support coupled with the ability to trade intraday makes the ETF vehicle an ideal access route into fixed income at a time when liquidity matters.”

The existing fundamental fixed income ETF products are:

• ETFS Lombard Odier IM Euro Corporate Bond Fundamental GO UCITS ETF [FWEC]

• ETFS Lombard Odier IM Global Corporate Bond Fundamental GO UCITS ETF [CRED]

• ETFS Lombard Odier IM Global Government Bond Fundamental GO UCITS ETF [CORE]

ETFS Lombard Odier IM Emerging Market Local Government Bond Fundamental GO UCITS ETF:

The investment objective of the ETFS Lombard Odier IM Emerging Market Local Government Bond Fundamental GO UCITS ETF is to track the LOIM Fundamental EM Local Currency Index (the “Index”).

The Index provides long-only exposure to the debt of emerging markets and developing countries(2), whose weights are determined according to Lombard Odier IM proprietary fundamental weighting methodology, which uses fundamental factors to assess issuers’ creditworthiness and identify those believed to be best placed to repay their debt. The approach is an alternative to traditional market-cap investing which over-weights those issuers with the greatest level of outstanding debt. This approach aims to better diversify portfolio risk as well as improve the risk-adjusted returns (the Sharpe ratio).

The Index operates a three-step fundamental approach, which takes into account economic inputs such as current indebtedness, size of revenues and social and political stability and thus goes further than GDP or fiscal-strength weighted alternatives to assess the creditworthiness of an issuer. Furthermore, rather than maintaining static allocations, the Index is adjusted on a monthly basis to take into account prevailing economic and market conditions.

(2) Countries that are defined as ”Emerging market and developing economies” by the International Monetary Fund as published in the World Economic Outlook. Bonds included have at least 1-year to maturity as at each calendar month, issued in the same currency as the local currency of that government’s country and pay fixed-rate coupons with the exception of inflation-linked bonds issued by Chile (in CLF) . The ETF is denominated in USD.


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