Saturday, July 28, 2018

Another Bond ETF is Coming

Nikko Asset Management (Nikko AM) had just announced it would list an ETF on the Singapore Exchange (SGX) on 27 Aug 2018. The new ETF, called the Nikko AM SGD Investment Grade Corporate Bond ETF (which I will shorten it to “the Fund”), tracks the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index.


This is a bond fund, similar to Nikko AM’s other offering, the ABF Singapore Bond Index Fund, which holds Singapore government and quasi-sovereign/supranational bonds. 

The Fund is Singapore dollar denominated, meaning all of the underlying assets are in SGD, although 74.8% of them are issued in Singapore. Being corporate bonds, the maturity date is shorter than that of government ones, averaging 4.7 years.

As the Fund’s name imply, it holds investment grade bonds ranging from AAA to BBB- under the Standard & Poor’s credit ratings. Also, the total expense ratio is about 0.2%, and the Fund intends to cap this ratio at a maximum of 0.3%.

The Bedokian’s Take

Given the fact that we only have a few locally listed bond ETFs, the introduction of this Fund is a refresher, especially for passive Bedokian Portfolio investors. Holding investment grade bonds, this would be a huge assurance as such bonds are deemed to be very less prone to default.

Though the Fund included the term “corporate bond”, it does contain some bonds from Singapore statutory boards such as the Housing Development Board and the Land Transport Authority, which I viewed them as quasi-government bonds.

Some may not like the fact that the distribution for this Fund is only once a year, unlike other securities that mostly pay out twice or four times annually. In my opinion, as long as it pays out regularly and timely, I am OK with it. 

If you are risk averse and want to take a step up to corporate bonds, this Fund would be a good consideration.


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