iShares Launches 2 Multinational TIPs ETFs

May 20, 2011

iShares rolls out a duo of local-currency TIPs funds, one that excludes U.S. debt.

iShares, the BlackRock unit and the world’s largest ETF provider,  rolled out two multinational inflation-protected bond funds today that give investors exposure to sovereign debt around the world denominated in local currency. One of the new funds excludes U.S. TIPs.

The two funds, which, according to iShares website, both have annual expense ratios of 0.40 percent, are:

  • iShares Global Inflation-Linked Bond Fund (NYSEArca: GTIP), which includes U.S. debt.
  • iShares International Inflation-Linked Bond Fund (NYSEArca: ITIP) excludes U.S. debt

According to regulatory filings iShares made in September, the index on which the global fund, GTIP, is based consists of 167 issues from 17 developed and emerging economies: Australia, Brazil, Canada, Chile, France, Germany, Greece, Israel, Italy, Japan, Mexico, Poland, South Africa, Sweden, Turkey, the U.K. and the
U.S.

ITIP includes debt from the same countries, except the U.S.

The products are aimed at investors looking to protect assets from the ravages of inflation at a time when commodity prices are soaring and many countries have significant budgetary problems that has led to deficit spending. The principal of the securities gets adjusted based on official inflation readings, such as the Consumer Price Index in the U.S.

“Global inflation may be an increasingly important part of portfolio construction going forward, as recent monetary policy raises the risk of inflation abroad,” Russ Koesterich, the chief investment strategist at iShares’ parent BlackRock, said in a press release. “Countries to watch include the US, UK, Canada, and Australia in the developed world and China, India and Brazil in the emerging markets,” Koesterich added.

Competition

ITIP, the fund which excludes U.S. TIPs, will go head-to-head with the SPDR DB International Government Inflation-Protected Bond ETF (NYSEArca: WIP) from State Street Global Advisors. WIP has gathered $1.35 billion in assets since its March 2008 inception, according to data compiled by IndexUniverse.

ITIP tracks the BofA Merrill Lynch International Diversified Inflation-Linked Index, which gives investors access to a pool of 135 issues, according to the filing iShares made with the Securities and Exchange Commission detailing the ETF.

SSgA’s WIP invests in a smaller pool of bonds—75 in total—but it taps into a similar mix of countries that include Brazil, Japan,
Canada and many European nations, though smaller as well. WIP has an annual expense ratio of 0.50 percent.

The BofA Merrill Lynch International Diversified Inflation-Linked Index is a “broad, market value weighted, capped total return index designed to measure the performance of inflation-linked sovereign debt that is publicly issued and denominated in the issuer’s domestic market and currency,” the filing said.

The global TIPs fund that includes U.S. debt, will track the BofA Merrill Lynch Global Diversified Inflation-Linked Index, a market-value-weighted capped total return index designed to measure the performance of inflation-linked sovereign debt, according to a separate filing iShares made last year.

 

 

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