Invesco launches three PowerShares fixed income ETFs in Europe

Nov 20th, 2017 | By | Category: Fixed Income

Invesco has launched three PowerShares-branded fixed income ETFs in Europe. The funds track Bloomberg Barclays indices and provide exposure to bonds from USD-denominated corporates, EUR-denominated corporates, and emerging market sovereigns.

Paul Syms, head of fixed income product management at Invesco PowerShares

Paul Syms, head of fixed income product management at Invesco PowerShares.

According to Invesco, the firm launched the three ETFs to meet strong demand among European investors for low cost fixed income vehicles.

Paul Syms, head of fixed income product management at Invesco PowerShares, commented: “While the many benefits of ETFs are well known to equity investors, the focus continues to shift towards the fixed income space. There is clear and strong demand from investors for low cost, simple, transparent and well-structured fixed income solutions and, as underscored by the highly competitive nature of these new products, Invesco PowerShares is determined to be the leading provider of such ETFs in Europe.”

The PowerShares USD Corporate Bond UCITS ETF (PUIG) tracks the Bloomberg Barclays USD IG Corporate Liquidity Screened Bond Index. The average rating of underlying securities is A-, with industrials accounting for around 60% of the index’s sector allocation. Investors can currently expect a yield to maturity of approximately 3.1%. PUIG’s total expense ratio (TER) is 0.16%.

The PowerShares Euro Corporate Bond UCITS ETF (PSFE) tracks the Bloomberg Barclays Euro Corporate Bond Index. The average rating of underlying assets is A-, with industrials accounting for just over half of the sector allocation. Current yield to maturity is approximately 0.61%. The fund’s TER is also 0.16%.

The PowerShares Emerging Markets USD Bond UCITS ETF (PEMD) tracks the Bloomberg Barclays Emerging Markets USD Sovereign Index. The average rating of underlying securities is BB+, with a yield to maturity of 4.9%. The top five country holdings are Argentina, Indonesia, Turkey, Mexico and Saudi Arabia. PEMD’s TER is 0.35%.

While Invesco took ownership of 17 fixed income ETFs in its recent acquisition of fellow ETF provider Source – funds which Source launched in collaboration with bond specialists PIMCO – these latest listings mark only the second time Invesco has launched a fixed income strategy in Europe directly under its PowerShares brand. Its first outing was the introduction of the PowerShares US High Yield Fallen Angels UCITS ETF (HYFA LN) in September 2016 (See: “Invesco PowerShares debuts time-weighted ‘fallen angel’ bond ETF”).

HYFA provides exposure to USD-denominated ‘Fallen Angel’ bonds of issuers domiciled in North America. Fallen angels are bonds that were originally issued with investment-grade status but have since been downgraded to junk. The strategy is based on the premise that the overly negative sentiment surrounding a downgrade into junk status causes fallen angels to become oversold, as investors, often forced by their investment mandate, sell en masse prior to and at downgrade, leading to a price anomaly. HYFA has a TER of 0.45% and AUM of $36m. It has since been made available with euro, pounds sterling, or Swiss franc currency hedging, each with a TER of 0.50%.

On 16 October 2017, Invesco expanded its range of short-term high yield ETFs with the launch of the PIMCO Euro Short-Term High Yield Corporate Bond Index Source UCITS ETF (EUHA GY), a Europe-focused version of its existing USD product which has $1.2 billion in AUM. The fund tracks the BofA Merrill Lynch 0-5 Year Euro Developed Markets High Yield 2% Constrained Index and has a TER of 0.44%.

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