Deutsche Asset Management has added an ETF providing US dollar corporate bond ‘yield plus’ exposure to its suite of Xtrackers ETFs....
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Xtrackers iBoxx USD Corporate Bond Yield Plus UCITS ETF(1) listed today on the London Stock Exchange after listing on the Deutsche Börse last Tuesday , March 13, 2018.
The ETF provides exposure to the highest-yielding investment-grade bonds that broadly constitute the US dollar investment-grade corporate bond market. Specifically, the ETF focuses on the top 33%, ranked by yield, of bonds that make up the Markit iBoxx USD Corporates Index. The ETF’s index also allows for bonds that were investment-grade at time of inclusion but have since been downgraded (‘fallen angels’), and which can remain in the index as long as they are not lower than rated BB- using average agency ratings as calculated by the index provider IHS Markit.
The resulting ‘yield plus’ index is composed of approximately 1,400 bonds and provides currently 0.47% (2) yield pick-up versus the broader investment-grade corporate bond index, with similar duration and BBB+ average rating (3).
“Investors looking for strategic bond investments that improve the risk and return profile of their portfolios may be attracted to our new US dollar corporate bond yield plus ETF as it can generate a yield pick-up for currently little additional risk. It achieves this by extracting exposure to higher corporate risk premia, from a broader investment-grade corporate bond index, and keeping lower interest rate exposure than traditional ETFs,” said Olivier Souliac, Strategic Beta Fixed Income Specialist at Deutsche AM.
The new ETF, which has an annual All-in Fee of 0.25% and is a physical replication ETF, complements Deutsche AM’s existing range of yield plus Xtrackers providing exposure to Euro corporate bonds and Eurozone government bonds. The Xtrackers range of yield plus ETFs has over EUR 1.5 billion in assets under management4. Since their launch, benefiting from a supportive market environment for yield-oriented, carry investors, all Xtrackers yield plus ETFs have outperformed their respective broad market benchmark (4).
Name of ETF: Xtrackers iBoxx USD Corporate Bond Yield Plus UCITS ETF
Underlying index name: Markit iBoxx USD Corporates 1-20 Yield Plus Index
BGG Code: XYLD
Fund Currency: USD
Annual All-in Fee: 0.25%
Physical/Synthetic: Physical UCITS
1 A sub-fund of Xtrackers (IE) plc.
2 Market cap-weighted yield as of February 23, 2018. Source: Bloomberg.
3 Source: Bloomberg, Moody’s, S&P.