New iShares sovereign debt products target risk mitigation

The launch of iShares range of eight single country Eurozone sovereign debt exchange traded funds comes after considerable reflection on the type of safehaven demand and portfolio construction challenges facing asset managers in the wake of the ongoing European financial crisis.

“At the beginning of this year we were looking at how we could approach the European economic uncertainty and what this would mean in terms of our product development, ” said Axel Lomholt, head of iShares Product Development EMEA.

“The conclusion we came to was that we could see different scenarios play out. We also concluded that if you were looking for a safehaven, then broader based indices may not be the right way to navigate portfolios through this uncertainty.”

As a result iShares decided to launch a suit of sovereign bond funds, rather than come up with a single product solution that would try to meet the various demands of different investors. Instead, the suite would allow clients to create their own portfolios – for example, for more flexiblity to create a tilt towards higher yield, Lomholt said.

 iShares Barclays Austria Treasury Bond ETF
 iShares Barclays Belgium Treasury Bond ETF
 iShares Barclays Finland Treasury Bond ETF
 iShares Barclays France Treasury Bond ETF
 iShares Barclays Germany Treasury Bond ETF
 iShares Barclays Italy Treasury Bond ETF
 iShares Barclays Netherlands Treasury Bond ETF
 iShares Barclays Spain Treasury Bond ETF

It may make less of a difference to investors able to build their own bond portfolios. But for those cho cannot it is a way to access products that are diversified across government bonds issued by specific products. Lomholt said the different ETFs could be seen as building blocks for clients to do their own asset allocation.

“For a lot of investors it gives a precise and easy way to access fixed income,” Lomholt said.

Key client types that he expects to take advantage of the new products include discretionary asset managers, medium sized asset managers, institutional driven clients, private banks and private wealth managers.

iShares said it was looking to build out its fixed income product range.


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