The SPDR Thomson Reuters Global Convertible Bond UCITS ETF listed on the Deutsche Börse, Xetra today and aims to offer investors cost-efficient and transparent exposure to the asset class.
Alexis Marinof, head of SPDR EMEA, said: “SSGA has been managing passive convertible bonds in a regulated ETF wrapper for more than five years in the US, managing nearly $3bn in assets and covering the liquid portion of the US market.
“Convertible bonds have exhibited historically lower correlations to traditional equity and bond markets, and typically will have lower sensitivity to interest rate changes than normal bonds which makes them a great portfolio diversifier.
“These features, combined with the potential for investors to protect on the downside whilst still being able to participate in the upside, make them more attractive in many instances than standard equities or bonds.”
The ETF tracks Thomson Reuters Qualified Global Convertible Index which currently includes convertible bonds denominated in multiple currencies from issuers around the world.
SPDR explained that convertible bonds share features of both debt and equity – like a traditional corporate bond, convertible bonds pay a fixed, periodic coupon and mature on a specific date. Where they differ from traditional bonds is that they also contain an option which gives the holder the ability, but not the obligation, to convert their bond into a pre-determined number of shares of the underlying company.
The company add that this means investors are potentially protected by the bond-like features in falling markets, but are also able to participate in rising markets as the value of the option rises along with equities.
Peter Sleep, senior portfolio manager, 7IM, added: “We believe the timing is ripe for an allocation to convertible bonds.
“SSGA has a long track record of managing passive convertible bond portfolios in the US and it’s an asset class that we’ve been seeking passive exposure to for some time, so we are delighted to be the first investor in the fund.”
