Tuesday , November 24 2020

The first local fixed-rate ETF breaks into the Chilean market



The product came into force on Wednesday, January 30, and takes the RiskAmerica Corporate Liquidity Lite index as a benchmark. During 2018, the index rented 5.4% over the 8.25% retracement that Ipsa accumulated over the same period.

The fund manager Singular AM strives that even in a scenario with local interest rate hikes, investors will be interested in local corporate interest income. Therefore, they launched the fund traded on the ETF Singular Chile Corporativo, the first of its kind, which was composed solely of local debt instruments.

The product came into force on Wednesday, January 30, and takes the RiskAmerica Corporate Liquidity Lite index as benchmark. During 2018, the index rented 5.4% compared to 8.25% in Ipsa during the same period.

And although rates are very low, thanks to geopolitical unforeseen and uncertainties in the global macroeconomic scenario, interest rates last year became a more attractive investment option for equity.

Within the ETF's investment policy, the Fund may invest in bank and corporate bonds issued by Chilean entities contained in the RiskAmerica index or belonging to entities holding other bonds of this type in the index as well as securities issued by the Treasury or the Central Bank in accordance with a prospectus sent of Singular to the Financial Market Commission (CMF).

"We are convinced that ETF's will be an important part of local portfolios, just look at EE's case. UU." Comments Singular economic analyst, Diego Chomali. In the northern country there are approx. 2,270 ETF's. Of this total, more than 385 are fixed-interest instruments that build up a value of their managed assets of $ 639 billion. US $.

In the Chilean market, there were no ETFs dedicated to replicating 100% of local interest income, although there was predominantly choice of debt instruments at the time of investment. Previously, other attempts to track fixed income were already recorded: in 2006, the LarraínVial launched the LVACL mutual fund, which attempted to emulate LVA's local interest rate index. The product did not last long with the small liquidity of its instruments.

Although in AGF they preferred not to make profitability estimates for the ETF's first year, they have confidence in the product's performance. And more: Singular plans to launch another ETF in the local market in February that will replicate an international stock index. Linked FTSE Global All Cap Index, the product will reflect the performance of approx. 8,000 shares globally.


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