INDEXCHANGE has extended its product range with a new family of Exchange Traded Funds (ETFs) for European Government Bonds.
As of 18 July, investors have been able to trade the new ETFs through the XTF segment of Deutsche Börse on a continuous basis. The ETFs track iBoxx Liquid Sovereigns indices for various maturity bands ranging from 1.5 years to more than 10.5 years.
"By launching the new iBoxx bond ETFs we are responding to a high market demand for passively managed bond funds,' explains Götz Kirchhoff, Chief Investment Officer (CIO) at INDEXCHANGE Investment AG. 'Many investors have realised that active management for fixed-income securities does not deliver any out-performance. In the first half of 2006 we were able to boost the assets in our existing bond funds for German government bonds by almost 150%, to EUR 3.4 billion."
The five ETFs on the new index family are:
The International Index Company (IIC) draws on government bonds from the entire Eurozone for calculating the indices. With this broadly-based investment universe, the new Exchange Traded Funds offer investors the opportunity of tracking the European bond market in a single product.
"By providing various maturity classes it will be possible for investors to control duration quite specifically", says Kirchhoff.
Unlike conventional bond indices, the IIC calculates the prices for iBoxx® indices on the basis of price offers from ten internationally renowned investment banks. Only bonds with a fixed-coupon denominated in euros or a predecessor currency are included in the respective index. The proportion of any one country represented in the index is limited to 20%.
"A major advantage of ETFs is their reasonable cost structure", says Kirchhoff. "No issue premium is charged and the annual management fee is only 0.15%." In comparison, a management fee of at least 1.0% is generally payable for actively managed bond funds, as well as an issue premium of 3.0% or more. By introducing this new family of funds we are systematically developing our expertise in bond securities while continuing the growth dynamics of last year.'
The turnover of INDEXCHANGE ETFs has already reached EUR 27 billion in the first half of this year. This means that INDEXCHANGE made up about 35% of the trading volume of all European ETFs. The Munich-based investment company also grew substantially in terms of Assets under Management (AuM). By the end of June these had risen by 28% to their present level of EUR 13.3 billion. "We would like to increase our assets by a further 25% to EUR16 billion by the end of the year,' adds Kirchoff. 'In addition, we will be launching several more new and innovative ETF ideas on the market.'
Background note: INDEXCHANGE Investment AG was founded on 27 October 2000 as an independent subsidiary of HypoVereinsbank. Its corporate mission is to develop, launch and manage Exchange Traded Funds. On 3 January 2001 the first three Exchange Traded Funds (ETFs) were listed on the XTF segment of Deutsche Börse AG. With a product range currently comprising 76 exchange traded funds on equity and bond indices, and Assets under Management of more than EUR 13 billion, INDEXCHANGE is the top player for ETFs in Europe.
Exchange Traded Funds are passively managed funds, which combine the advantages of index funds and equities while excluding the disadvantages. In a single transaction, investors acquire a mutual fund that tracks an index very precisely (i.e. in principle a whole market or sub-segment). Investment strategies geared towards particular markets or sectors can be implemented much more easily and efficiently in this way. Exchange Traded Funds can be traded continuously on stock exchanges just like equities. This ensures fair prices at all times for buying and selling.
In addition, INDEXCHANGE offers an exceptional price strategy: with a simple structure and extremely good value. An issue premium is not charged for trading INDEXCHANGE funds on a stock exchange. The annual management fee for the index funds is 0.09% up to a maximum of 0.6%.