Mexican broker Casa de Bolsa Finamex has debuted the first ETF in Europe to target US dollar-denominated debt issued by the Mexican government.
The fund is the first dedicated Mexican government bond ETF in Europe.
The Finamex Mexico International Sovereign Bond 5-10yr UCITS ETF has been listed on London Stock Exchange in US dollars (Ticker: MEXS LN) and pound sterling (MEXP LN).
The fund has come to market through London-based white-label ETF issuer HANetf and is the first fixed income fund to be launched on the firm’s platform.
The ETF comes with an expense ratio of 0.55%.
The fund provides investors with transparent, convenient access to internationally issued Mexican sovereign bonds without having to make a large investment in a relatively illiquid asset.
According to Finamex, Mexican sovereign debt may appeal to investors as the country is well positioned macroeconomically relative to other Latin American nations, having a large, open economy and one of the lowest debt-to-GDP ratios in the region. Mexico’s credit rating is also investment-grade (currently BBB), making the country’s debt suitable even for more conservative-leaning pension funds, endowments, and foundations.
Commenting on the launch, Eduardo Arturo Carrillo Madero, CEO of Casa de Bolsa Finamex, said: “We are very excited to launch our first UCITS ETF product in partnership with HANetf. We have seen local Mexican demand grow for these constant duration products in the last few years. Mexican bonds are one of the most liquid in emerging markets and clients continuously look for exposure to Mexico in dollar-denominated bonds. We think products like these can further help the Mexican government achieve a greater depth in their future offshore financing needs.”
Hector McNeil, co-CEO of HANetf, added: “We are excited to partner with Finamex to launch the Finamex Mexico International Sovereign Bond 5-10yr UCITS ETF. The demand for UCITS ETFs is increasingly growing among investors due to strong regulation and structure, coupled with strong distribution of products through brokers such as Finamex.”
Methodology
The ETF is linked to the S&P/BMV Sovereign International UMS 5-10 Years Target Maturity 30% Capped Bond Index which consists of Mexican government securities with maturities between five and ten years that have been issued in US dollars outside of Mexico. Only bonds with minimum par amounts outstanding of $1 billion are eligible for inclusion.
The index includes a minimum of 6 constituents and may venture outside of the stated requirements, while prioritizing bonds with robust liquidity scores, to reach that threshold.
Constituents are weighted by market value while capping the weight of any single bond at 30%. Rebalancing occurs on a quarterly basis.
The index has a modified duration of 6.45 years.