UBS ETF (LU) J.P. Morgan EM Multi-Factor Enhanced Local Currency Bond UCITS ETF (USD) A-dis

Issuer: UBS

Asset Class: Fixed Income

TER: 40bps

Trading Currency: GBX

Pays Income: False

Listing Date: 11 Sep 2018

Ticker: EMLO

ISIN: LU1720938841

This actively managed fund offers exposure to local-currency government bonds from a diverse range of emerging market countries. Its core objective is to deliver returns that exceed its benchmark, the J.P. Morgan GBI-EM Global Diversified Index, by employing a systematic, multi-factor investment approach. Instead of tracking a traditional market-capitalization-weighted index, which can lead to over-concentration in the most indebted nations, this strategy actively selects and weights its holdings based on a quantitative model. This share class is also currency-hedged, aiming to minimize the impact of foreign exchange fluctuations and isolate the performance of the underlying bond portfolio for investors.

The investment process is driven by four well-established academic factors: Value, Quality, Momentum, and Carry. The Value factor seeks to identify undervalued bonds relative to their fundamentals. The Quality component favors debt from countries with stronger economic indicators and fiscal discipline. Momentum aims to capitalize on recent positive performance trends in both bonds and currencies. Finally, the Carry factor targets bonds offering higher yields, which can be a significant component of total return in fixed income. By combining these distinct factors, the strategy aims to generate a more consistent source of outperformance and provide a better risk-adjusted return profile over a full market cycle.

This product is designed for investors looking for enhanced returns from emerging market debt while seeking to mitigate some of the risks associated with passive investing in this asset class. The active, factor-based approach provides a potential avenue for alpha generation beyond simple market exposure. The hedging feature adds another layer of risk management, making it potentially suitable for those who wish to capture the yield and price appreciation opportunities in emerging market bonds without taking on direct currency risk. It can serve as a core holding or a strategic allocation for portfolios seeking diversification and higher potential yields than are typically available in developed markets.