State Street Global Advisors (SSGA) says it has launched the “world’s first” passive global convertible bond exchange-traded funds (ETF).
Called the SPDR Thomson Reuters Global Convertible Bond Ucits ETF, the product is listed on the Deutsche Börse Xetra and aims to offer investors exposure to the risk-return profile of this asset class.
The ETF tracks the Thomson Reuters Qualified Global Convertible Index, which includes convertible bonds sharing features of both debt and equity, in multiple currencies from issuers around the world.
Convertible bonds pay a fixed, periodic coupon and mature on a specific date, but also contain an option that gives the holder the ability to convert the bond into a specific number of shares of the underlying company.
This provides potential protection from the bond-like characteristics in falling markets, but also allows participation in rising markets as the value of the option increases alongside equities, says SSGA.
Alexis Marinof, head of SPDR for Europe the Middle East and Africa, says: “Convertible bonds have exhibited historically lower correlations to traditional equity and bond markets, and typically will have lower sensitivity to interest rate changes than normal bonds, which makes them a great portfolio diversifier.”
SSGA manages over $410 billion (€323 billion) in around 220 ETFs worldwide.
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