For a while I've been writing about the importance of foreign fixed income exposure in a diversified portfolio, how we integrate this space into our client portfolios and how easy it would be for ETF providers to make real inroads here in offering exposure. What exits now are some broad based funds that are usually heavy in Japan because Japan has issued the most debt (kind of market cap weighted by total debt issued). There are a couple of emerging market bond ETFs that are better holds, IMO.
Well it turns out that iShares offers a lot of foreign bond ETFs in other markets. For example in Canada iShares offers seven ETFs that own Canadian bonds. iShares UK offers more funds than can be counted in GBP and euros in all sorts of fixed income categories. I am aware of one other iShares site, that being for Hong Kong but there are no bond ETFs available on that site.
It might be a case where the company may not want to commit the capital to seeding US versions of these funds which would be reasonable given that embracing truly new segments of the market can be difficult for many investors (there are many advisors who still use an OEF equivalent of SPY, IWM and EFA). The solution here might be some sort of blurring of the lines between exchanges such that anyone so inclined could buy the iShares DEX Universe Bond Index Fund which has ticker XBB in Toronto but apparently no pink sheet symbol for US trading.
This would of course be a big evolutionary step but not completely unprecedented, it is pretty easy to buy Canadian common stocks through Schwab and they are about the worst for accessing foreign stocks and of course Fidelity, Interactive Brokers and eTrade offer access. There are different rules for funds but it seems to me to be a legal solution that if implemented intelligently would be much less capital intensive than seeding a bunch of new funds.
In my opinion this is something that is going to evolve such that the access is made available one way or another. For now it may be a demand issue in that I think there is failure to recognize the need by too many people but the exposure is important even if people are slow to realize.
On a possibly related note, IndexUniverse reported that iShares had filed in the US for a foreign preferred stock ETF that is 73% Canadian issues.
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6 comments:
Thought provocative post this morning, Roger. Thank you. I have been considering opening an Interactive Brokers account for some time just for the access to Toronto and London, and the myriad of other accessible markets would be a big bonus. Anyone(s) out there with an IB account? Positives? Negatives? Thanks.
I've been trying to access the right country bonds through etf's and haven't found much yet. you have a great solution. Hopefully someone will provide us with access to Australia, Canada, and Brazil, with out the drag of Japan on Aus or Argentina on Br. I may not be looking in the right places. Fidelity is not foreign stock exchange friendly in retirement accounts. They think it is too risky (say what?). I may have found a really great reason to use a CFA to get me in the right place.
Sam
Egypt's Mubarak is one in a long, long list of USA backed gangster criminals.
Hillary Clinton called him a family friend, GW Bush invited him to his home.
When the brutually oppressed finnaly revolt, Americans are like..oh how inspiring...
Perhaps American's sould get "inspired at thier own hypocrisy and the massive death and oppression US foriegn policy has brought on the world.
Oh and I wonder why the world so hates America?
Answer: They do not hate us because our own freedom. They hate us because we hate thier freedom.
Anon 10:19
You're probably the same moron who made a couple of similar inane political posts on Roger's site last week. Take your anti-American political rants over to the Huffington Post. This is an investment forum.
Hey Roger,
Glad you found the Morningstar.co.uk site useful.
On Interactive Brokers: am just opening an account there myself now. If you want Asian stocks, you better hope they're listed in HK - no Singapore. No Norway either. And not all listed stocks or ETFs on a particular exchange are available for purchase.
But for U.S. investors, there is no real competition.
Yep, just what I was looking for: Canadian, Australian and Norwegian Government bonds.
Would it be so hard to offer them through US brokerages?
If anyone knows of any bond funds with most of their holdings in these three countries, that would be a great single fund solution.
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