DWS has launched an ETF capturing the bond issuance of governments in emerging markets (EMs) denominated in their respective local currencies.
The Xtrackers J.P. Morgan EM Local Government Bond UCITS ETF (XEML) is listed on the London Stock Exchange and Deutsche Boerse with a total expense ratio (TER) of 0.25%.
XEML physically replicates the J.P. Morgan Government Bond Index-Emerging Markets Global Div 10% Cap 0.2% Floor index to offer exposure to investment grade and high-yield EM sovereign issuance.
Index constituents are market cap weighted with a tilt based on a country’s relative size versus the average size of all countries in the benchmark.
Only bonds with at least six months to maturity are eligible for inclusion, with less than 20% of the basket’s weight being allocated to bonds with more than 10 years to maturity, while cash, money market instruments and derivatives claim a 15% allocation.
Country weights are capped at a maximum weight of 10% and a minimum weight of 0.25%, applied at each monthly rebalancing.
Brazil, Malaysia, China, Thailand and Mexico sovereigns currently comprise XEML’s top five exposures, representing weights of 9.1%, 8.7%, 8.7%, 8.7% and 8.6%, respectively.
The ETF is predominantly skewed towards bonds with lower credit weightings, with an 11.5% allocation to Baa3-rated debt and 59.9% rated as ‘unknown’.
XEML marks a step away from DWS’s recent focus on ESG launches, with the firm recently debuting a Paris-Aligned Benchmark (PAB) Scandinavian equity ETF.
In March the issuer also announced a five-strong range of climate transition ETFs targeting US, Japan, Europe, EM and global equities.