Nikko AM SGD Investment Grade Corporate Bond ETF
The Nikko AM SGD Investment Grade Corporate Bond ETF (the “Fund”) is the first to offer investors easy access to Singapore Dollar-denominated, investment grade corporate bonds in affordable units. The Fund aims to replicate the performance of the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index (the "Index"), allowing investors to diversify their portfolios with corporate bonds from high quality issuers#.
Since 2012, Singapore Corporate Bonds have provided better returns compared to Singapore Government Bonds and more stable returns versus Singapore equities.*
#Unrated bonds constitute 22% of the Index weight as of 30 June 2018, and are classified according to iBoxx Implied Rating classification.
*Based on the performance of the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index, iBoxx ABF Singapore Government Total Return Index and FTSE Straits Times Index over the last five years. Source: Bloomberg and Nikko AM, 30 June 2018.
ETFs have lower management fees compared to unit trusts.
Easy In, Easy Out
ETFs trade like stocks with market makers to ensure liquidity.
Higher yields than bank deposits
The Fund index’s (iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index) yield to maturity is 3.22% p.a. (gross) as compared to the average 36-month SGD fixed deposit interest rate offered by three major Singapore local banks.
(Source:30 June 2018, DBS, OCBC, UOB, iBoxx and Nikko AM)
Investment grade rating shows that the corporate bond has a relatively low risk of default.
Diversified portfolio of quasi-sovereign, Singapore and foreign corporate bonds
Fund Performance (SGD)
Returns are unavailable at time of publicaton.
*Distributions are not guaranteed and are at the absolute discretion of the Manager. Distributions could be derived from interest income or capital gain, and where distributions are made from capital, prior-approval by the Fund's trustee is required. Distributions paid out of capital of the Fund will decrease its Net Asset Value.
Please refer to the Fund's prospectus and Product Highlight Sheet for further details.
~Management Fee and Trustee Fee are included in the calculation of Total Expense Ratio.
^Usual brokerage and handling charges to apply. Please refer to the Fund Prospectus for complete information on the Fund, relevant disclosures and fees payable.
ABOUT THE INDEX - iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index
The iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index is an Index compiled and calculated by Markit Indices Limited. The Index is designed to reflect the performance of SGD denominated non-sovereigns investment grade bonds.
The index rules aim to offer a broad coverage of the underlying bond universe, whilst upholding minimum standards of investability and liquidity. Minimum inclusion size for each corporate bond is SGD 300 million with a maximum 20% limit on single issuer exposures. The Nikko AM SGD Investment Grade corporate bond ETF aims to track the performance of the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index.
The Index consists of investment grade bonds
The top 5 issuers in the Index include established and credible institutions such as the Housing Development Board (HDB), Temasek Financial, United Overseas Bank (UOB), the Land Transport Authority (LTA), and Singapore Airlines. Only investment grade bonds, with a credit rating of AAA to BBB, are eligible for inclusion into the Index.
The Index is Singapore Dollar denominated with no currency risk
The Index is 74.8% Singapore issuers and 100% Singapore Dollar denominated with no currency risk for local investors.
The Index has a lower duration
The Index has an average duration of 4.7 years. Typically, the longer the duration of a corporate bond portfolio the more sensitive it will be to changes in interest rates. The Index has a lower duration relative to the Singapore Government Bonds because almost 90% of the underlying corporate bonds will mature within 10 years.
With a yield of 3.22%, the Index offers higher yields as compared to bank fixed deposits and Singapore government securities.
Source: DBS, OCBC, UOB, MAS, Markit iBoxx and Nikko AM (based on internal calculation), as of 30 June 2018.
^ Yield comparison is based on yield to maturity on a three to five year maturity period. The yield on bank fixed deposit refers to the average 36-month fixed deposit interest rate offered by the three major Singapore local banks, on a deposit amount between $1,000 and $50,000. The theorectical Index's yield to maturity is as of 30 June 2018, assuming no corporate default. The yield on the Singapore Government Security (SGS) is based on the yield to maturity of the 1.75% Singapore Government Bond maturing on 1st February 2023 (ISIN code SG31B8000001) as of 30 June 2018.
A diversifier to improve risk-adjusted returns
During the period from January 2013 to May 2018, Singapore corporate bonds displayed low correlation to Singapore equities. By adding Singapore corporate bonds to an all-Singapore equity portfolio, investors could reap diversification benefits and improve the risk-return profile of their portfolio.
Source: Nikko AM, as of May 2018
(based on internal calculation)
A corporate bond is debt issued by a company. Companies borrow for many reasons, from buying equipment to funding a new business venture. An investor in a corporate bond is effectively lending to the company. In return, the investor receives payments based on the corporate bond’s interest rate (or “coupon rate”).
When an investor buys bonds he is lending money to the company. Unlike an investor buying stocks, they are essentially owning a piece of the company. The value of the stock is depended on market forces which allows investors to either earn or suffer a loss. However, with bonds, investors only earn interest on the amount that they lent the company.
Investors will know exactly when they will receive their interest payments (a.k.a coupon payments), how much they will get, as well as when the bond matures, which is when the par value of the bond will be repaid back to the investors.
Rather than trading individual bonds in the over-the-counter (‘OTC’) market, investors can access these exposures by purchasing a bond ETF on an exchange. Doing so may lower the cost of trading while providing real-time pricing information.
Institutional investors use bond ETFs as core long-term investment holdings, as tools for tactical exposures and as liquidity instruments that can help improve access to markets or act as substitutes/complements to credit derivatives.
Investment Grade are a form of rating of bonds. An investment grade rating shows that the corporate bond has a relatively low risk of default. Investment Grade bonds are normally rated from Aaa – Baa (Moody’s) and AAA – BBB (S & P).
Bonds with credit ratings lower than BBB- (S & P & Fitch) or Baa3 (Moody’s) are considered to have a lower credit quality. They are also commonly known as Speculative Bonds.
Source: S&P, 30 June 2018
As the strategy of the fund is to track the performance of the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index, the fund aims to pay the Index yield, net of expenses.
Distributions are not guaranteed and are at the absolute discretion of the Manager. Distributions could be derived from interest income or capital gain, and where distributions are made from capital, prior-approval by the Fund's trustee is required. Distributions paid out of capital of the Fund will decrease its Net Asset Value. Please refer to the Fund's prospectus and Product Highlight Sheet for further details.
Presently, the Fund is included under SRS but not included under CPFIS.