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WisdomTree Launches Locally Denominated Asian Bond ETF

New ETF holds debt from 12 Australasian nations, but not from Japan.

Robert Goldsborough, 03/21/2011

Last week, WisdomTree rolled out WisdomTree Asian Local Debt ALD, the first actively managed exchange-traded fund to invest solely in a basket of locally denominated, sovereign debt from a variety of Asian countries, excluding Japan.

The new ETF comes in the wake of WisdomTree's highly successful launch last August of the popular local-currency, emerging-markets debt ETF WisdomTree Emerging Markets Local Debt ELD, which has gathered more than $665 million in assets since its launch. ALD offers investors exposure to sovereign debt from 12 Australasian countries but, quite pointedly, does not own any Japanese debt. The reason for the exclusion has nothing to do with the country's recent tsunami-related troubles. Instead, WisdomTree officials reason that because Japan already makes up a healthy portion of most international-bond indexes, they are trying to make this new ETF work for investors as a complement to a regular international-bond fund.

For investors, the draw for ALD has to be gaining exposure to an asset class in sovereign debt that has a relatively healthy balance sheet, along with the combination of the growth of the Asian countries' economies and the attendant appreciation of those nations' currencies. WisdomTree is billing the new fund as a way to get "one-trade exposure" to income generation from the world's fastest-growing region. Investors also may be attracted to the fund's higher yield (4.2%) compared with U.S. fixed-income ETFs.

The obvious difference between ELD and ALD is that the 14 countries that ELD invests in all are emerging-markets economies, scattered across Latin America, Asia, Africa, and Eastern Europe. Meanwhile, ALD invests in the sovereign debt of some countries that might be considered emerging markets, such as China, India, Indonesia, Thailand, Malaysia and the Philippines, but also in more developed Asian markets, such as Hong Kong, Singapore, Taiwan, South Korea, Australia, and New Zealand.

WisdomTree officials said that the duration of the new fund is between two and eight years, which is an incredibly broad range. The firm also announced that ALD launches with a whopping $145 million in assets, meaning that WisdomTree has seeded the new fund with a significant amount of capital relative to other new ETFs.

Like ELD, ALD charges a 0.55% expense ratio.

Robert Goldsborough is an ETF analyst with Morningstar.

Disclosure: Morningstar licenses its indexes to certain ETF and ETN providers, including Barclays Global Investors (BGI), Claymore Securities, First Trust, and ELEMENTS, for use in exchange-traded funds and notes. These ETFs and ETNs are not sponsored, issued, or sold by Morningstar. Morningstar does not make any representation regarding the advisability of investing in ETFs or ETNs that are based on Morningstar indexes.

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