Finamex launches a Mexican sovereign bond ETF in Europe | ETF strategy

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Mexican broker Casa de Bolsa Finamex launched the first ETF in Europe targeting US dollar-denominated debt issued by the Mexican government.

The fund is the first ETF dedicated to Mexican government bonds in Europe.

the Finamex Mexico International Sovereign Bond 5-10yr UCITS ETF was listed on London Stock Exchange in US dollars (symbol: MEXS LN) and the British pound (LN MEXP).

The fund came to market through a London-based white-label ETF issuer HANetf and is the first bond fund to launch on the company’s platform.

The ETF comes with an expense ratio of 0.55%.

The fund provides investors with transparent and convenient access to internationally issued Mexican sovereign bonds without having to invest heavily in a relatively illiquid asset.

According to Finamex, Mexican sovereign debt could attract investors because the country is well positioned macroeconomically compared to other Latin American countries, having a large open economy and one of the lowest debt-to-GDP ratios in the world. region. Mexico’s credit rating is also investment grade (currently BBB), making the country’s debt suitable for even more conservative pension funds, endowments and foundations.

Commenting on the launch, Eduardo Arturo Carrillo Madero, CEO of Casa de Bolsa Finamex, said, “We are very excited to launch our first UCITS ETF product in partnership with HANetf. We’ve seen local Mexican demand increase for these constant-duration products over the past few years. Mexican bonds are among the most liquid in emerging markets and clients are always looking for exposure to Mexico in dollar-denominated bonds. We believe that products like these can further help the Mexican government to deepen its future offshore financing needs.

Hector McNeil, co-CEO of HANetf, added: “We are delighted to partner with Finamex to launch the Finamex Mexico International Sovereign Bond 5-10yr UCITS ETF. Demand for UCITS ETFs is growing among investors due to strong regulation and structure, coupled with strong product distribution through brokers such as Finamex.

Methodology

The ETF is linked to the S&P/BMV Sovereign International UMS 5-10 Years Target Maturity 30% Capped Bond Index which consists of Mexican government securities with maturities between five and ten years that were issued in US dollars outside of Mexico. Only bonds with a minimum nominal amount outstanding of $1 billion are eligible for inclusion.

The index includes a minimum of 6 constituents and can venture outside of the stated requirements, while prioritizing bonds with strong liquidity scores, to meet this threshold.

The constituents are weighted by market value while capping the weight of any single bond at 30%. Rebalancing takes place quarterly.

The index has a modified duration of 6.45 years.

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