First exchange traded funds to provide targeted exposure on euro debt

LONDON | The exchange traded funds or ETF platform of global investment company BlackRock on Wednesday announced the launch of eight funds that will provide targeted exposure to the sovereign debt of eight euro zone countries. The launch pushes on the expansion of iShares’ fixed income range to meet growing interest in fixed income ETFs, and to satisfy demand for more specific exposures within the asset class, iShares said.

iShares offers over 500 funds globally across equities, fixed income and commodities, which trade on 20 exchanges worldwide. The iShares Funds are bought and sold like common stocks on securities exchanges.

The ETFs invest in the fixed rate debt issued by the government of the specified country, denominated in local currency, with the bonds having at least one year until maturity. They are physically backed funds and each has a total expense ratio of 0.20%. The ETFs providing exposure to sovereign debt from Austria, Belgium, Finland, France, Germany, Italy, the Netherlands and Spain are the first of their kind in the world.

Commenting on the launch, Axel Lomholt, head of iShares product development said that investors are allocating to fixed income in a more granular way than ever before. This new series of single country euro zone debt exposures will allow them to invest and express their views in a more precise fashion, Lomholt explained.

“The ETFs can be used to overweight or underweight bonds in fixed income portfolios on a country basis, according to an investor’s risk and return expectations and objectives, as well as to implement core allocations.”

The launch of this series makes iShares the first provider in Europe to offer multiple single country euro zone sovereign exposures under one roof. The move shows the urgent need investors in European sovereign debt feel of having hedging tools.