Launched in 2005, the ABF Pan Asia Bond Index Fund (PAIF) helped to pioneer the Asian fixed income ETF industry. It provides an innovative, easy-to-access and cost-efficient solution to invest in a diversified portfolio of Asian local currency government and quasi-government bonds in one single trade.
ABF Pan Asia Bond Index Fund (PAIF)
6 PAIF has delivered positive returns in 15 out of the past 20 calendar years.2
7 Offering easy and low-cost access to Asia's local bond markets, PAIF allows investors to diversify their portfolios with over 500 local currency bonds in one single trade.3
8 PAIF's portfolio has an average credit quality of A+.3
9 The Asian sovereign and quasi-sovereign local currency bond market has grown over ten-fold since the inception of PAIF, from US$1.4 trillion to US$17.5 trillion.4
10 PAIF is a key part of the initiative to develop Asia's local bond markets. It started to participate in securities lending in June 2018 to deepen secondary market liquidity.
Favourable Risk-Return Profile
The macro fundamentals of many Asian governments remain robust, and they will likely continue to be a growth driver of the global economy. Investors, therefore, have an opportunity to obtain a good yield without taking on excessive risk. In fact, Asian bonds have historically demonstrated a risk-return profile that is proportional to that of US Treasuries.
Potential for Additional Yield via Local Currency Appreciation
Currency appreciation can be an important contributor to local currency bond returns. While recent US-dollar strength has depressed currency gains in Asian local currency bonds, over the medium to long term, there is a good chance of a rebound. In the meantime, US-dollar strength presents attractive buying opportunities for Asian local currency bonds.
A 'Back to Basics' Diversified Portfolio Construction Strategy
In an interconnected world, correlations between Asian local currency bonds and other major asset classes are unavoidable. Still, they remain low enough to allow such assets to add valuable diversification benefits to investors' portfolios.
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