PICB: Another International Corporate Bond ETF
Today (6/3/10) Invesco PowerShares brought out an International Corporate Bond Portfolio under the ticker PICB. Yield-hungry investors who are willing to accept currency risk may want to take a look.
PICB will attempt to reflect the performance of the S&P International Corporate Bond Index. This index is composed of investment-grade corporate debt from non-U.S. issuers in the G-10 currencies. This includes the Australian, New Zealand and Canadian Dollars; the Euro; the Norwegian, Danish and Swedish Krone; the British Pound, Japanese Yen, and Swiss Franc.
The index is constructed with a methodology that removes the lower-yielding bonds at each monthly rebalance. The aggregate weight of any one currency cannot exceed 50% as of each rebalancing. All holdings must be rated investment-grade by either Standard & Poors or Moody’s.
According to the index fact sheet from S&P, highest country weightings as of May 3, 2010 were the United Kingdom (21.5%), Netherlands (16.5%) and France (10.3%). This places 48.3% of the index in corporate bonds from these three European nations. Total Europe exposure adds up to 77.7%, with the remainder coming from Australia, Canada, Japan and New Zealand. The so-called PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) had a 12.6% allocation.
PICB will compete with the recently-launched SPDR Barclays Capital International Corporate Bond ETF (IBND). As we noted at the time, IBND actually has significant exposure to U.S. companies via bonds issued in other currencies. PICB is therefore a more “international” portfolio despite the heavy concentration in Europe.
PICB is too new to have a yield estimate, but the underlying index shows a yield to maturity of 3.58%. Subtracting an estimated expense ratio of 0.50%, PICB should be yielding around 3%. Modified duration of the portfolio is 5.47 years.
For more information, visit the PICB summary page at the PowerShares site.
Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.