The InterCapital EUR Romania Govt Bond 5-10yr UCITS ETF will provide investors with straightforward and liquid access to euro-denominated government bonds, filling a significant gap in the Romanian investment landscape. The ETF, currently listed in Croatia under the ticker 7GROM, has already raised €5.5 million in under six months, showcasing the strong appeal of Romanian bond yields to international investors.

"At InterCapital, our commitment is to bring relevant and accessible investment products to Romanian investors. Romanian government euro bonds offer an attractive yield of approximately 5.5%, a standout in the European bond market, given the country's comparable credit rating to peers like Greece and Hungary. Through this ETF, we provide an efficient way for Romanian investors to gain exposure to these bonds without the complexities of directly managing individual portfolios. The ETF structure ensures liquidity, automatic rebalancing, and reinvestment of coupons, making it a valuable tool for both retail and institutional investors. Announcing this launch, just before Romania's National Day on December 1st, is our way of honoring the strong economic potential of Romania and celebrating its progress. This ETF represents a bridge between investors and the opportunities Romania offers, enabling them to contribute to and benefit from the country's development," stated Ivan Kurtovic, Chairman of the Management Board at InterCapital Asset Management.

The resurgence of interest in bonds comes after central banks globally began raising interest rates in 2022 to combat inflation. While this initially led to a decline in bond prices, it has since reset yields to attractive levels, presenting an opportunity for strong returns as interest rates stabilize and eventually decline. Romanian euro bonds are particularly appealing, offering significantly higher yields compared to similarly rated European peers. For example, Germany's 10-year euro bonds yield 2.16%, Greece and Hungary around 4.5%, while Romania offers approximately 5.5%. Despite having a credit rating on par with Greece and Hungary, Romania's yields stand out, reflecting a unique investment opportunity. Over time, as Romania progresses in EU integration, strengthens its fiscal position, and reduces perceived risks, these yields are expected to align more closely with its European counterparts, offering potential price appreciation in addition to the attractive coupons.

Compared to purchasing individual bonds, ETFs offer significant advantages such as liquidity, with the ETF being tradable on the Bucharest Stock Exchange, providing easy entry and exit. Investors also gain diversification through exposure to a balanced portfolio of bonds within the 5-10 year maturity range. Automatic rebalancing ensures that coupons are reinvested, and shorter-maturity bonds are replaced with longer ones to maintain the target duration and optimize returns. Although the ETF is classified as active, its management adheres to strict rules, with average maturity kept at between 5 and 10 years and a low management fee of 0.5%, with the total expense ratio capped at 1%.

Romania's current 10-year bond spread over Germany stands at 3.3%, compared to just 0.9% for Croatia, a country that has undergone significant financial and structural reforms in recent years. Similar reforms in Romania, alongside deeper EU integration and improved fiscal discipline, could drive this spread lower, delivering further gains to bondholders. The performance of Croatia over the past decade provides a compelling case study for Romania's potential. As Romania progresses in its economic development and European integration, Romanian bond yields shall follow a similar downward trajectory, creating opportunities for strong returns.

InterCapital Asset Management has been present in Romania since 2023 and introduced its first Romanian product, the BET-TRN UCITS ETF, in May 2024. This ETF provides exposure to the Bucharest Stock Exchange's blue-chip index, enabling investors to diversify their portfolios with ease. Alongside the launch of the InterCapital EUR Romania Govt Bond 5-10yr UCITS ETF, the company also plans to introduce an ETF tracking the Slovenian SBITOPtr index on the Bucharest Stock Exchange, offering Romanian investors access to Slovenia's blue-chip equity market. Both ETFs are expected to begin trading on the Bucharest Stock Exchange by the end of 2024, underscoring InterCapital's commitment to serving Romanian investors with innovative, high-quality investment products.