Some 97% of European institutional investors and wealth managers agree that the economic and fiscal reforms implemented by the Gulf Cooperation Council (GCC) countries have increased the region’s creditworthiness.

Of those surveyed, 47% ‘strongly agree’ with this view, according to research by European ETF provider Tabula Investment Management Limited.

Meanwhile, one in three (36%) surveyed strongly agree that region’s large foreign currency reserves will help it maintain stable economic growth and lower bond risks when compared to other emerging markets. A further 61% indicate that they generally agree with this view.

GCC bond ETF

Earlier this year, Tabula launched the first Gulf Cooperation Council (GCC) government bond ETF. The Tabula GCC Sovereign USD Bonds UCITS ETF (TGCC LN) provides exposure to a broad portfolio of USD-denominated government bonds issued by the six GCC countries (Saudi Arabia, the UAE, Qatar, Oman, Bahrain and Kuwait).

Given the current market volatility and continued global economic uncertainty, 46% of institutional investors and wealth managers interviewed strongly believe that now is a favourable time for investors to reassess asset allocation decisions to increase diversification across regions and instrument types.

Finally, an overwhelming 96% of professional investors surveyed, firmly believe that as the GCC region undertakes numerous initiatives to diversify revenue streams away from oil and gas, a more granular allocation to the region could play a significant role in building more defensive portfolios.

Portfolio diversification

“Current market volatility is increasing investors’ need to manage portfolio diversification” says Tabula CEO Michael John Lytle. “In the emerging markets, most investors use very broad fixed income benchmarks with no ability to overweight specific geographies. We have found that many investors believe that GCC countries are going to be successful in using their current profits to develop new businesses outside of oil and gas. They are implementing this view through equities and lack tools to do the same in fixed income. That is why we developed the TGCC ETF.”

TGCC aims to track the ICE Gulf Cooperation Council Government Bond ex-144a Index (the Index; ticker: EGCC Index). Developed by Tabula, in partnership with ICE, the Index is composed of approximately 100 AA- to B-rated government bonds denominated in USD.

To be included, bonds require a minimum 1-year maturity and a minimum amount outstanding of $500 million. The Index currently provides exposure to six GCC countries and applies a 25% country cap. The Index has a current yield of 5.0% and a duration of 7.8 years.

The Tabula GCC Sovereign USD Bonds UCITS ETF (TGCC LN) is listed on the London Stock Exchange, with ~$40 million in current assets.

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