Courtesy of Chris Flood at FT.com
State Street Global Advisors has launched the world’s first exchange traded fund that provides exposure to inflation-linked debt in
emerging markets, a rapidly growing asset class that is attracting interest from international investors.
The SPDR Barclays EM Inflation-Linked Local Bond Ucits ETF has been listed on the Deutsche Börse, with a further listing on the London Stock Exchange expected shortly. Scott Ebner, global head of product development for SSgA, said the new ETF would provide a simple solution for investors keen to access a previously difficult segment of the fixed income market.
“Investors are increasingly looking for ways to diversify their emerging markets exposure beyond traditional equity allocations and are cognisant of prospective inflationary pressures,”said Mr Ebner. SSgA surveyed 128 pension professionals and asset managers across Europe in March and found that three-quarters expected global inflation to rise over the next three years. Nearly 70per cent said that inflationary pressures would be higher in emerging markets than in the developed world.
Fewer than a fifth (19 per cent) of those surveyed by SSgA said that it was easy to access EM inflation-linked bonds. However, almost half (47 per cent) said that they planned to increase their exposure to emerging market debt over the next three years.
The market for EM inflation-linked debt has grown strongly over the past 10 years. The outstanding total of debt is at almost $600bn, providing sufficient size, depth and liquidity for an index-based investment approach. The new ETF tracks the Barclays EM inflation-linked 20% capped index, which includes inflation-linked sovereign bond issued by Brazil, Mexico, Chile, South Africa, Poland, Turkey, Israel, Korea and Thailand.