iShares launches Europe’s first global high-yield bond ETF

Nov 15th, 2012 | By | Category: Fixed Income

iShares, the exchange-traded funds (ETF) platform of BlackRock, has announced the launch of the iShares Global High Yield Bond ETF (HYLD), Europe’s first ETF to provide exposure to global high-yield bonds. The fund has been listed on the London Stock Exchange (LSE)

iShares launches Europe’s first global high-yield bond ETF

iShares’ new global high-yield bond ETF offers a yield-to-maturity of over 6%, thanks to a hefty weighting, circa 80%, in industrial companies.

As the search for income continues in the current low yield environment, high-yield bonds continue to be of interest to investors willing to take on the extra corporate credit risk offered by sub-investment-grade issuers.

The launch marks the continued expansion of iShares’ European fixed income product range and complements the existing iShares Markit iBoxx Euro High Yield Bond ETF (IHYG) and the iShares Markit iBoxx $ High Yield Capped Bond ETF (SHYU), also both listed on the LSE.

The new fund tracks the Markit iBoxx Global Developed Markets Liquid High Yield Capped Index, an index representing the performance of sub-investment-grade bonds issued by corporates, based in developed markets worldwide, in either USD, EUR, GBP or CAD. Bonds included in the index are rated BB+ or less by at least one of three major rating agencies: S&P, Fitch or Moody’s. As of 31 October, the index had a yield to maturity of 6.17%.

The fund will hold the constituent bonds physically and will be managed using a sampling technique providing investors with liquid exposure to the performance of the underlying index. To ensure diversification, a cap has been applied so that no single issuer accounts for more than 3% of the fund.

The fund has over 680 holdings, making it extremely well diversified on an individual name basis. On sector basis, however, Industrials make up 80%, meaning the fund is heavily exposed to cyclical companies. Investors should also note that US-domiciled issuers account for approximately 70% of the fund.

Alex Claringbull, senior fixed income portfolio manager for BlackRock’s iShares fixed income range commented: “Many of our European clients are looking to diversify away from their local bond markets. This new iShares ETF offers global exposure in one low cost trade giving a diversification that is difficult to achieve elsewhere.”

Claringbull added: “Fixed income will remain a key focus for iShares in 2013 as we continue to cater to the evolving demands and needs of our clients.”

The fund comes with a Total Expense Ratio (TER) of 0.50%.

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