Credit Suisse unveils ‘new generation’ of ETFs

Credit Suisse has unveiled its ‘new generation’ of ETFs, with the launch of 13 swap-backed funds on the SIX Swiss Exchange.

The bank says its inaugural swap-based range represents the next stage in the evolution of the ETF market, delivering a lower tracking error than physically replicated funds in many instances, while providing transparency at every stage of the investment process.

Three of the new CS ETFs track emerging market regions, based on the MSCI EM Asia, MSCI EM Latin America and MSCI EM EMEA indices.

The other 10 funds replicate the indices of individual countries, including Brazil, Chile, Mexico, Russia, South Africa, Korea, Taiwan, Australia, India and the CSI 300, which comprises the 300 largest Chinese companies listed on the Shanghai and Shenzhen stock exchanges.

Credit Suisse says it is often difficult - if not impossible - for investors to gain direct access to the more complex country indices, such as the CSI 300. Synthetic replication provides exposure to these less liquid indices, with typically less tracking error than traditionally replicated funds.

The swaps backing the fund, which provide the performance of the respective index in return for the ETF's substitute basket of securities, are transacted with Credit Suisse and are rest every business day. This means the counterparty risk, or investor's exposure to Credit Suisse, is limited to the movements in the index that day.

The firm is also focusing on transparency to differentiate its proposition, by publishing the composition of the ETF's substitute basket on its website, on a daily basis.

Credit Suisse has previously only offered traditionally replicated funds. Its new swap-backed offering is based on an integrated venture between Credit Suisse's asset management division, which is well-established in running index funds and providing a fiduciary approach, with its investment banking arm to provide the swap capabilities.