Most fixed income benchmarks, including global indices, are cap-weighted, but that strategy can leave investors yearning for more income and yield. A new global bond exchange traded fund looks to address those issues.
The WisdomTree Yield Enhanced Global Aggregate Bond Fund (NYSEARCA: GLBY) debuted earlier this month. GLBY can be seen as the global alternative to the well-known WisdomTree Barclays U.S. Aggregate Bond Enhanced Yield Fund (NYSEArca: AGGY). The new GLBY tracks the Bloomberg Barclays Global Aggregate Enhanced Yield Index.
“In global markets, the opportunities for yield enhancement can be even greater since you have another lever to pull via additional countries and currencies,” said WisdomTree in a recent note. “However, given that many developed markets have lower interest rates than the U.S., won’t investing globally dampen income? In short, we believe the answer is no. By hedging global bonds to U.S. dollars, there is typically an attractive yield pickup due to the significant difference between developed short rates. This also can significantly reduce the volatility of international investing for U.S.-based investors.”
GLBY ETF Details
GLBY’s largest holding is the aforementioned AGGY at a weight of over 64% so while the new ETF offers exposure to over 30 countries, the U.S. is by far GLBY’s largest geographic exposure.
While GLBY allocates over 42% of its weight to corporate bonds, its credit quality is stellar as bonds rated AAA or AA combine for 49% of the new fund’s weight.