1nvest Global Government Bond Index Feeder ETF
Just when it appeared that the worst about Covid was behind us, inflation erupted unexpectedly. Covid-induced supply-chain disruptions led to an increase in the demand for most products, catching suppliers unawares and necessitating price increases.
Most major central banks termed the initial inflationary pressures as being transitory. However, Russia’s unjustified invasion of Ukraine led to a sharp drop in oil and certain crop supplies, driving Brent crude prices to levels not seen since 2014 and food inflation to historic levels last seen in the 1980s.
Most equities are down year-to-date, making room for bonds to be considered in a broader portfolio for diversification benefits and to minimise volatility. This exchange-traded fund (ETF) provides an easy access to global government bonds from developed markets such as the US, Germany, Japan, France and Italy, all of which are grappling with equity market volatility and inflation. It has produced modest returns of 5.82% since launch (14 March 2018), partly due to the rand’s weakness. A big challenge for the underlying index was the lack of inflation in most G7 member countries, which contributed to the soft performance of government bonds. The fund has a total investment cost of 0.40% and a tracking error of 0.81%.
The objective of the 1nvest Global Government Bond Index Feeder ETF is to track the FTSE Group- of-7 Index as closely as possible in rand.
Fund suitability
- This ETF is ideal for investors seeking broad exposure to global bonds. The fund has a moderately conservative risk profile and is therefore suitable for investment over the medium term.
Fees
- The fund has a total expense ratio of 0.40%.
Top holdings
- The fund holds treasuries and medium-to-long-term government bonds from the G7, which are all investment-grade, according to S&P Global and Moody’s.
Analysis of the fund’s strategy
- The 1nvest Global Government Bond Index Feeder ETF aims to provide investors with price performance of the FTSE G7 index, net of fees. These bonds are issued by developed countries that have investment-grade rating, according to Moody’s and S&P Global.
1nvest Global Government Bond Index Feeder ETF (JSE:ETFGGB)
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Background: Exchange-traded funds (ETFs)
Exchange-traded funds (ETFs) are passively managed investment funds that track the performance of a basket of pre-determined assets. They are traded the same way as shares and the main difference is that whereas one share gives exposure to one company, an ETF gives exposure to numerous companies in a single transaction. ETFs can be traded through your broker in the same way as shares, say, on the EasyEquities platform. In addition, they qualify for the tax-free savings account, where both capital and income gains accumulate tax free.
Benefits of ETFs
- Gain instant exposure to various underlying shares or bonds in one transaction
- They diversify risk because a single ETF holds various shares
- They are cost-effective
- They are liquid – it is usually easy to find a buyer or seller and they trade just like shares
- High transparency through daily published index constituents
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