PowerShares ‘Dim Sum’ Bond ETF Near Launch

September 13, 2011

PowerShares looks to be close to launching its answer to the Chinese bond ETF trend.

Invesco PowerShares, the company behind the $21 billion Nasdaq-100 ETF (NYSEArca: QQQ), filed paperwork to offer what it too called a “Dim Sum” exchange-traded fund focused on Chinese bonds, joining a host of other money management firms that are targeting fixed income in China.

It wasn’t immediately clear if the PowerShares Chinese Yuan Dim Sum Bond Portfolio (NYSEArca: DSUM) was the same fund that the Lisle, Ill.-based ETF firm described in a filing in July. At that time, it put the PowerShares Asia Pacific Bond Portfolio into registration, saying the proposed Asia Pacific fund would mostly own Chinese yuan-denominated bonds. A PowerShares official declined to elaborate on the confusion.

What is clear is that Chinese bonds are becoming a hot spot of ETF innovation. Building on the success of the $667 million WisdomTree Asia Local Debt Fund (NYSEArca: ALD), ETF firms are looking intensively at Chinese bonds. China is perhaps the most dynamic economy in the world today, and, in addition to cutting attractive coupons, bond investors are also keen on taking advantage of the yuan’s appreciation.

A week after that first PowerShares regulatory filing in July, New York-based Van Eck Global put a China-focused bond ETF, the Market Vectors Dim Sum Bond Fund, into registration, apparently the first to dream up the “Dim Sum” name. Another China-focused bond fund, the Guggenheim Yuan Bond ETF (NYSEArca: RMB), appears to be nearing launch, a regulatory filing made Sept. 9 suggests.

In sum, the widespread pursuit of a Chinese bond ETF is looking more and more like a “who’s who” in the U.S. ETF industry.

In addition to PowerShares, Van Eck and Lisle, Ill.-based Guggenheim, other firms such as New York-based WisdomTree and San Francisco-based ETSpreads have also filed for bond ETF focused on Chinese credits.

In its latest filing outlining its Chinese Yuan Dim Sum Bond Portfolio, PowerShares said 80 percent of the portfolio would be invested in yuan-denominated bonds. It defined “Dim Sum” bonds as those that are issued and settled outside of mainland China.

PowerShares said its Dim Sum fund comes with an annual expense ratio of 0.45 percent—less expensive than the 0.65 percent expense ratio that is planned for the Guggenheim Yuan Bond ETF, according to the two companies’ respective filings.


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