NEW YORK--(BUSINESS WIRE)--Van Eck Global has launched the Market Vectors® ChinaAMC China Bond ETF (NYSE Arca: CBON), a U.S.-listed ETF designed to provide investors with direct access to China’s onshore bond market, it was announced today.
The launch continues Van Eck’s leadership in China and emerging markets funds. The company launched the first ETF providing exposure to A-shares in the U.S. (Market Vectors ChinaAMC A-Share ETF, NYSE Arca: PEK) on October 13, 2010, and this summer it launched a Chinese equity ETF (Market Vectors ChinaAMC SME-ChiNext ETF, NYSE Arca: CNXT), primarily focused on innovative, non government-owned companies.
CBON seeks to invest in all major segments of the Chinese fixed income markets, including sovereigns, policy banks, and high rated corporate bonds. “China’s domestic bond market is expanding and evolving at the same time. While the full liberalization of the markets is likely to take a long time, movement towards greater access for borrowers and lenders, and a higher degree of market oriented financings such as bond issuance have already greatly broadened the opportunity set for local investors,” said Fran Rodilosso, Senior Investment Officer for Market Vectors ETFs.
CBON is the newest addition to Van Eck’s family of emerging markets bond ETFs which include the largest local-currency bond ETF in the U.S., Market Vectors Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC), and the largest emerging markets corporate bond ETF in the U.S, Market Vectors Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM), by assets under management as of October 31, 2014.
“China is currently the largest emerging markets bond market, yet to this point investors outside of mainland China have been mostly excluded from direct ownership of locally issued bonds,” said Mr. Rodilosso. He added “China’s onshore bond market has had historically low correlation to core asset classes and has delivered attractive yields in comparison to developed bond markets in recent years.”
CBON seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the ChinaBond China High Quality Bond Index, ticker: CDHATRID. The Index is comprised of fixed-rate, Renminbi (RMB)-denominated bonds issued in the People’s Republic of China by Chinese credit, governmental and quasi-governmental (e.g., policy banks) issuers. As of November 10, 2014, the yield to maturity for the Index was 4.1%.
Van Eck Global has a history of offering fund solutions designed to take advantage of tomorrow’s financial markets. It offered the U.S.’s first real assets fund in 1968 and started investing in emerging markets in the early ’90s.
ChinaAMC will serve as sub-adviser to CBON using a Renminbi-Qualified Foreign Institutional Investor (RQFII) quota that it has received in order to gain access to this market on behalf of foreign investors. This marks the third ETF for which Market Vectors and ChinaAMC have partnered, joining the China A-share focused Market Vectors ChinaAMC A-Share ETF (NYSE Arca: PEK) and the Market Vectors ChinaAMC SME-ChiNext ETF (NYSE Arca: CNXT).
“China continues to be a focus for Van Eck Global, particularly through our Market Vectors ETF family,” said Ed Lopez, Marketing Director at Market Vectors. “Its economy has had significant impact on global markets in recent years and continues to evolve, yet may be under allocated in investors’ portfolios. This CBON launch is another example of how Market Vectors is delivering access to relevant investment ideas we believe will help shape tomorrow’s markets.”
CBON has a gross expense ratio of 0.57 percent and a net expense ratio of 0.50 percent, which is capped contractually until September 1, 2016. The cap excludes certain expenses, such as interest.
Van Eck Global notes that investing in Chinese securities, particularly RMB bonds, comes with associated risks, which include risks associated with the Chinese economy and financial markets as well as adviser and sub-adviser risk, credit risk, interest rate risk, sovereign and quasi-sovereign defaults, non-diversification risk and risks associated with non-investment grade securities. In addition, the Fund is subject to risks associated with foreign and emerging markets investments, RQFII regime risk, political and economic instability, currency fluctuation, adverse governmental regulation, and market volatility, which may adversely affect the Fund or Fund trading. Bonds and bond funds will decrease in value as interest rates rise.
About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family is one of the largest providers of ETFs in the U.S. and worldwide.
Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and managed approximately $32.3 billion in investor assets as of September 30, 2014.
Yield to Maturity measures the annualized return on bonds held to maturity.
There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Debt securities carry interest rate and credit risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health.
An investment in the Fund may be subject to risks which include, among others, risk of investing in Chinese securities, particularly RMB bonds, credit risk, interest rate risk, sovereign and quasi-sovereign defaults, adviser and sub-adviser risk, non-diversification risk, risks associated with non-investment grade securities and risk of the RQFII regime, all of which may adversely affect the Fund. Investments in mainland China may be subject to local customs, duties and rights of ownership, which might change at any time should policy makers deem them in China’s best interest. As the Fund invests in securities denominated in Chinese Renminbi, changes in currency exchange rates may negatively impact the Fund’s return. Foreign and emerging markets investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, changes in currency exchange rates, unstable governments, and limited trading capacity which may make these investments volatile in price or difficult to trade. The Fund’s assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors. For a more complete description of these and other risks, please refer to the Fund’s prospectus and summary prospectus.
Indices are unmanaged and are not securities in which an investment can be made.
ChinaBond China High Quality Bond Index is compiled and calculated by China Central Depository & Clearing Co., Ltd. All copyright in the ChinaBond China High Quality Bond Index values and constituent list vests in China Central Depository & Clearing Co., Ltd.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in cash. Shares may trade at a premium or discount to their NAV in the secondary market.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR or visit marketvectorsetfs.com. Please read the prospectus and summary prospectus carefully before investing.
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