iShares JP Morgan USD Asia Credit Bond Index ETF

Hi everyone,

I am a new investor, and I was quite confused when I read an article about this bond ETF.

I understand that it is listed on SGX, and has two variants: N6M which trades in the base currency of USD; QL2 which uses SGD.

Does either one provide a currency hedge for me as a Singaporean?

I quote a sentence from the article: “The ETF does not hedge the FX risk for you if you invest via the SGD share class.”

I am quite confused. If I buy the SGD variant (QL2), wouldn’t this eliminate any FX fluctuation?

This is the URL of the actual article:

Many thanks in advance for anyone who can enlighten me.

I have to be honest. I am no expert here. Hopefully someone more experienced than me would also respond to this.

Based on my limited knowledge, this is what I understand

  1. The underlying asset is in USD (i.e. N6M)

  2. No currency hedge is performed for QL2

  3. This basically means that even if the underlying asset value did not change (i.e. N6M price did not change), it is possible for QL2 price to change if there is a change in USD/SGD rates.


Hi Kaisaul and Evan,

I’m the person who originated the post on theinvestquest. Thank you for supporting the site.

As Kaisaul mentioned, iShares JPM USD Asia Credit Bond Index ETF has two share classes, SGX ticker “QL2” is SGD-denominated, while SGX ticker “N6M” is USD-denominated. Do note that both share classes are invested in the same portfolio of bonds that are entirely denominated in USD.

Evan has explained it correctly, so I have little to add except for an analogy if it helps.

Imagine you paid S$1.37mn to buy a US house, which you then rent out for US$100k per year. Although your initial payment was in SGD, the asset and rentals received are USD-based (similar to an investor buying the SGD-denominated ETF, whose portfolio is invested entirely in USD-denominated bonds).

A year later, assuming the value of the house remains the same (in USD-terms) but USD depreciates against SGD (from 1.37 at time of purchase, to 1.23 a year later), the value of your house will now be “only” worth S$1.23mm, resulting in you making a principal loss of S$0.14mm entirely from FX movements. The US$100k rental you collected is now also “worth less” in SGD-terms.

To illustrate this point in reality, we use the recent performance of QL2 (SGD-denom) vs N6M (USD-denom). The performance has been +8.25% and 15.18% respectively from 23 March to 21 August this year. The performance difference of 6.9% corresponds closely to the depreciation of USD against SGD, as the USD/SGD FX rate has declined from 1.461 to 1.372 ( a change of 6.1%) over the same time period.

From my experience, most ETFs do not hedge FX risk. So if you are looking to reduce currency risks from your bond portfolio, you can 1) buy an ETF that invests only in SGD bonds (such as the NikkoAM SGD Investment Grade Bond ETF), 2) buy a SGD-denominated bond mutual fund that invests in USD bonds (majority of bond mutual funds will hedge out the FX risk for you, if you are paying in a currency that differs from the underlying bond portfolio currency denomination), 3) Use a Mutual Fund Robo-advisor like Endowus (which currently only uses SGD-hedged bond funds).

Hope this helps!


Hi drpiggy,

Yes, your explanation definitely helped to clear the air. Your example was also shed much light!

Now I understand that FX fluctuations can be a double-edged sword. You have written, and I quote: From my experience, most ETFs do not hedge FX risk.

I have browsed through the prospectus of N6M but so far, I have not come across anything regarding currency hedging for N6M. Perhaps I need to re-read it carefully again.

Can I verify from your experience if N6M does provide currency hedging, while QL2 does not?

Thank you once again, drpiggy and evankoh.

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Hi Kaisaul,

Both N6M and QL2 share same prospectus.(

As you pointed out, there is no specific mention of the currency hedging policy for N6M.

Page 51 mentioned a bit on currency hedging but it looks like a generic statement, regarding if the tracked bond index comprises of bond denominated in different currencies.

Extracted the below from Page 51
– Exchange Rate Risk – To track an unhedged Underlying Index that comprises multi-currency
Securities, the non-base currency exposure will not be hedged, and any movement between the nonbase currencies and the base currency will be fully transmitted to the Net Asset Value of the Index
Fund when computed in its base currency. Adverse movements in currency exchange rates can cause
a decline in the Net Asset Value of such an Index Fund.

Practically, how we can view if N6M is hedged or not may be observed from the example on performance, mentioned in the earlier example. If it were SGD-hedged, the difference in performance would be relatively close (typically fund managers would use FX forward contracts to implement their hedging, where the hedging cost will be the interest rate differential between USD and SGD, which is close to zero at the current time).

Long story short, both N6M and QL2 do not hedge FX.

However, do note that there is no need for N6M (denominated in USD) to hedge any currency since there is no FX mismatch between the ETF’s traded currency versus the underlying portfolio of bonds owned by the ETF (which are all USD-denominated).

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Thank you once again, drpiggy!