ETF STRATEGY NEWS! ETF Strategy is pleased to announce the launch of ETF Strategy Center (hub.etfstrategy.com), an on-demand repository of webcasts, videos, podcasts and white papers. Debut with a special series on technology and innovation in China and the digital economy.
Goldman Sachs Asset Management launched a large emerging market government bond ETF that charges no management fees in its first year of operation.
the Goldman Sachs Access Emerging Markets USD Bond ETF (GEMD US) was listed on Cboe BZX Exchange.
While the fund’s gross expense ratio is 0.45%, its net expense ratio is currently 0.00% due to a fee waiver in place until February 2023.
The ETF is linked to the FTSE Goldman Sachs Emerging Markets USD Bond Index which provides broad exposure to emerging market bonds while excluding countries with relatively weak governance, high inflation growth and unfavorable import measures.
The index is constructed from the FTSE Emerging Markets Broad Bond Index which covers both investment grade and high yield debt issued in US dollars by sovereign and quasi-sovereign entities domiciled in emerging markets. Eligible issues must be more than one year to maturity and a minimum issue size of $500 million.
Countries in the universe are ranked first according to the World Bank’s Worldwide Governance Indicators which cover six dimensions of governance: voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law and control of corruption. Countries ranked in the bottom 10% are excluded.
The universe is then further ranked by a composite factor derived from two equally weighted fundamental indicators provided by the International Monetary Fund: a trade indicator based on the year-on-year difference in the import coverage ratio and a the cost of goods and services. based on the absolute change in inflation. Countries ranked in the bottom 5% are also removed.
The remaining universe is then divided into two maturity buckets: bonds with a residual maturity between one and seven years and bonds with a residual maturity greater than seven years. Within each maturity bucket, the components are weighted by market value while capping the weight of each country at 5% and adjusting the weightings of the maturity buckets to match the weighted average effective duration of the parent universe.
The ETF will compete with several emerging market USD bond ETFs currently in the market. The biggest of them is the iShares JP Morgan USD Emerging Markets Bond ETF (EMB US) which houses $16.9 billion and comes with an expense ratio of 0.39%.