Insights

How PAIF Has Delivered Two Decades of Low-Cost Stability

Celebrating its 20th anniversary in 2025, the ABF Pan Asia Bond Index Fund (PAIF) was launched to enhance investor access to Asian bond markets and provide a cost-effective, diversified vehicle for exposure to local-currency government and quasi-government bonds across eight Asian economies: Mainland China, Hong Kong SAR, Indonesia, Korea, Malaysia, Philippines, Singapore, and Thailand. The Fund aims to deliver investment results that closely correspond to the performance of the Markit iBoxx ABF Pan-Asia Index. At the time of writing, the total net assets of PAIF are $3.7 billion,¹ and the number of fund holdings, diversified by geography and currency, is 617.²

May 27, 2025 5 min read

PAIF Offers Broad Exposure in a Single Transaction.

Another factor behind PAIF’s development was that individual investors found it complex and potentially costly to purchase and hold local-currency bonds directly to create an evenly spread portfolio. With PAIF, units can be bought and sold in the same way as ordinary stocks, typically through a broker.

PAIF uses a stratified sampling approach to match the index's characteristics and returns by investing in a well-diversified portfolio representing the index.³ As of 30 April 2025, PAIF generated a one-year annualised return of 11.2%.⁴

Local Currency Bond Markets Are Growing Strongly

The value of the local-currency bond market in emerging East Asia grew by 9.6% in 2024, touching USD26.3 trillion, which was swifter than the US and Europe.⁵ The fastest-growing regional market during the same year was Vietnam at 18.9%, followed by Indonesia, which expanded by 16.7%.⁶

Growing Economies and Higher Yields

Asian bonds generally offer higher yields than those available in the US or Europe.⁷ Asian economies are becoming increasingly stable, and the International Monetary Fund (IMF) predicted in its April 2025 World Economic Outlook that they will grow by 4.5% during 2025. This compares favourably to the expected growth of 1.8% in the US during 2025 and 0.8% in the Euro Area over the same period.⁸

Low Correlation to Other Bond Investments

An additional attractive characteristic of PAIF is that its returns are relatively uncorrelated with other investment options.⁹ A low interrelationship between investment assets helps investors diversify and should help lower portfolio volatility.

Trade Tariffs May Crimp Growth in the Region

PAIF has navigated a wide variety of market and geopolitical events in its 20 years, the most recent of which is the new tariff regime introduced by the US. High punitive import tariffs on China appear to have been dropped by the US, and the current level is only 30% rather than 145%. China will tax US imports at 10% rather than the punitive rate of 125%.¹⁰ Overall, these levies and the associated uncertainty have dampened trade, and given that negotiations are ongoing, the outcome on tariff levels remains unclear.

Recent economic data from China points to a sharp slowdown in new export orders as customers delay purchases until the tariff picture becomes clearer.¹¹ Factory activity has also slowed in China, with the official manufacturing purchasing managers’ index survey falling to 49 in April from 50.5 in March.¹² A number below 50 signals a contraction in activity. China’s government has announced several measures to help support its economy. These include policies to support exporters, such as loan assistance and attempts to boost domestic consumption.¹³

PAIF is Relatively Low-Cost and Liquid

Overall, ETFs, such as PAIF, offer a low-cost and uncomplicated way to potentially harness economic opportunities in Asia. One thing that hasn’t changed over the two decades is PAIF’s appeal to investors seeking income and relative stability.¹⁴

Footnotes

Disclosure

All forms of investments carry risks, including the risk of losing all of the invested amount. Such activities may not be suitable for everyone.

Past performance is not a reliable indicator of future performance.

Diversification does not ensure a profit or guarantee against loss.

International Government bonds and corporate bonds generally have more moderate short-term price fluctuations than stocks, but provide lower potential long-term returns.

The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.

The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.

Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.

The example mentioned is for illustrative purposes only.

Investing in foreign domiciled securities may involve risk of capital loss from unfavorable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations.

Currency Risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

Assets may be considered "safe havens" based on investor perception that an asset's value will hold steady or climb even as the value of other investments drops during times of economic stress. Perceived safe-haven assets are not guaranteed to maintain value at any time.

Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.

The views expressed in this article are the views of Kheng-Siang Ng through the period ended 27 May 2025 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

This article is issued by State Street Global Advisors Singapore Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong.

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