EG Shares Launches Suite of Fixed Income ETFs; First Trust Debuts 3 Income-Focused Funds

by on January 9, 2014 | ETFs Mentioned:

With Wall Street wrapping up its first full week of trading in 2014, the ETF industry is already gearing up for what hopefully will be another successful year in the space. In 2013, markets welcomed more than 140 new exchange traded products, which included more than 90 new equity ETFs, 30 bond funds, four commodity ETNs, and six multi-asset ETFs. Though 2014 has just started, ETF issuers are already filling the product pipelines. This week, investors were introduced to six new funds, which all focus on generating current income [see 7 ETFs To Be Excited For In 2014].

In partnership with TCW, an emerging markets fixed income asset manager, EG Shares launched its first suite of EM fixed income ETFs:

  • RussiaTCW EM Short Term Investment Grade Bond ETF (SEMF): This fund tracks the J.P. Morgan Custom EM Short Term Investment Grade Bond Index, which consists of U.S. dollar-denominated emerging market bonds with remaining maturities between one and three years. Currently, SEMF invests more than two-thirds of total assets in corporate bonds, though it does provide meaningful exposure to quasi-sovereign and sovereign bonds. Bonds from emerging markets in Europe and Latin America make up the majority of the portfolio.
  • TCW EM Intermediate Term Investment Grade Bond ETF (IEMF): This fund is similar to SEMF, though it focuses on emerging market bonds with remaining maturities between four and seven years. IEMF’s holdings are currently skewed towards corporate bonds, with the majority of issuers domiciled in Latin America, Europe and Asia. Currently, Russian and Brazilian bonds account for roughly 40% of the portfolio [see The Most Successful New ETFs of 2013].
  • TCW EM Long Term Investment Grade Bond ETF (LEMF): This fund targets longer-dated emerging market fixed income securities, focusing on bonds with remaining maturities between eight and 12 years. Like SEMF and IEMF, the fund mainly consists of fixed income from Brazil and Russia, though it does offer meaningful exposure to issuers from Mexico, China, and Turkey.

Each of EG Shares’ new funds will charge 0.65% in total expenses, slightly above the average fees charged by ETFs in the Emerging Markets Bond ETFdb Category

Illinois-based First Trust also debuted its first funds of 2014, launching three new income-focused funds:

  • High Income ETF (FTHI): This actively managed ETF’s primary objective is to provide current income, as well as capital appreciation. The fund will invest in large cap equity securities listed on U.S. exchanges, will utilize an “option strategy” consisting of writing (selling) U.S. exchange-traded covered call options on the S&P 500 Index. The fund charges an expense ratio of 0.85%.
  • Low Beta Income ETF (FTLB): Another actively managed fund, FTLB also utilizes an options strategy that is combined with investments in large cap U.S. equities. FTLB will also use a hedging strategy that will seek to provide the fund with downside protection and reduce the fund’s price sensitivity to declining markets. FTLB also charges 0.85% [see 14 Rapid Fire ETF Ideas for 2014].
  • NASDAQ Rising Dividend Achievers ETF (RDVY): This fund tracks the NASDAQ Rising Dividend Achievers Index, which is is composed of the securities of 50 companies with a history of raising their dividends and that exhibit the characteristics that suggest they will continue to do so in the future. RDVY’s expense ratio is 0.50%.

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Disclosure: No positions at time of writing.