iShares launches euro financials corporate bond ETF on LSE

May 9th, 2013 | By | Category: Fixed Income

iShares, the exchange traded funds (ETF) platform of BlackRock, has announced the expansion of its European-listed corporate bond suite with the launch of the iShares Barclays Euro Corporate Bond Financials UCITS ETF (EUCF) on the London Stock Exchange (LSE).

iShares launches euro financials corporate bond ETF on London Stock Exchange

Stephen Cohen, Head of EMEA Investment Strategy and Insights Team, iShares.

The new bond ETF, which is focused solely on financial issuers such as banks, complements the firm’s existing corporate bond line-up and provides a further way for investors to take a targeted approach to fixed income investing.

The fund tracks the Barclays Euro-Aggregate: Financial Index, a sub-index of the Barclays Euro-Aggregate: Corporates Index, and is replicated by holding physical bonds that are actual constituents of the index. It is managed using a sampling technique, providing investors with efficient and liquid exposure to the performance of the underlying index.

Inclusion in the index is based on the currency of the issue – in this case the euro – and not the domicile of the issuer. Constituent bonds may therefore be issued by companies located outside the eurozone, including, for example, from the UK, US and Switzerland.

Eligible bonds must have a fixed-rate coupon, be of investment-grade quality (as determined by Moody’s, Standard & Poor’s and Fitch), and be from financial issuers in the banking, insurance, finance, brokerage and real estate investment trust sectors. Only bonds with a minimum remaining time to maturity of one year and a minimum amount outstanding of €300 million are included in the index.

The financials sector is the largest component of the European investment-grade universe, representing 47% of the Barclays Euro-Aggregate: Corporates Index, as of the end of April 2013. The sector offers the potential for a yield pick-up beyond that achievable through an aggregated euro corporate bond exposure. For example, the Barclays Euro-Aggregate: Financial Index offers a yield of 2.06% versus a 1.94% yield from the parent Barclays Euro-Aggregate: Corporates Index.

Commenting on the launch, Stephen Cohen, Head of Investment Strategy and Insight EMEA at iShares, said: “Fixed income remains a core component of our ETF product range and we continue to innovate and evolve our product offering in this area. The new fund provides targeted exposure to this important segment of the bond market in a single trade. Investors can use this new iShares ETF in conjunction with existing iShares funds to express tactical views in their asset allocation.”

With the launch, iShares now offers 17 corporate bond ETFs, including a number of other segment-focused and specialist funds such as the iShares Barclays Euro Corporate Bond 1-5 ETF (SE15), the iShares Barclays Euro Corporate Bond ex-Financials 1-5 ETF (EEX5) and the iShares Barclays Euro Corporate Bond Interest Rate Hedged ETF (IRCP).

The new fund has a total expense ratio of 0.20%.

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