Van Eck Global has announced the launch of the Market Vectors International High Yield Bond ETF (IHY), the first US-listed ETF designed to address a segment of the high-yield bond market which it believes is under-represented in many investor portfolios.
Van Eck Global has announced the launch of the Market Vectors International High Yield Bond ETF (IHY), a fund providing exposure to sub-investment-grade debt issued by corporations located outside the US.
Commenting on the launch, Edward Lopez, Marketing Director of Market Vectors, said: “Our research has shown that for many investors the current allocation to corporate high-yield debt may miss as much as 35% of the global high-yield market.
“That underexposure may be especially important as international corporate high-yield bonds currently offer higher yields as well as historically lower default rates than similar debt instruments issued in the US.”
IHY seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the BofA Merrill Lynch Global Ex-US Issuers High Yield Constrained Index (HXUS), an index comprised of sub investment-grade debt issued by corporations located outside the US, which may include emerging market countries.
Bonds within the index are denominated in major global currencies, such as euros, dollars, Canadian dollars or pound sterling, and are issued in the major domestic or Eurobond markets.
As of March 27, 2012, the index included 1,008 debt issues of 546 corporations located in 69 countries, including a 33% allocation to emerging market bonds. The index yield-to-worst of 8.3% was 1.2% higher than US high-yield bonds, as represented by the BofA Merrill Lynch US High Yield Master II Index.
“In today’s persistent low interest environment, investors continue to search the globe for new sources of income,” said Francis Rodilosso, one of the fund’s portfolio managers. “With IHY, we have created an income-oriented ETF that, by tracking its index, may offer high-yield diversification, a high level of potential income and exposure to issuers worldwide that may experience more robust economic growth than the United States.”
IHY adds to Market Vectors’ existing suite of ETFs that include other international bond funds such as the Market Vectors Emerging Markets Local Currency Bond ETF (EMLC), the Market Vectors LatAm Aggregate Bond ETF (BONO), and the Market Vectors Renminbi Bond ETF (CHLC), as well as a range of US municipal bond ETFs.
The Market Vectors International High Yield Bond ETF is Market Vectors’ 46th ETF, and comes with a gross expense ratio of 0.53% and a net expense ratio of 0.40% (capped at least until 1 September, 2013). The fund is listed on the NYSE Arca.
Investors should note that investing in international high-yield debt, and high-yield securities in general, is not without risks, including the inherent volatility of high-yield security prices, changes in interest rates, currency risks, extreme volatility and political uncertainty.