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VanEck launches two new UCITS-compliant ETFs for high yield corporate bonds on London Stock Exchange

Global asset manager VanEck is expanding its product spectrum to include two UCITS ETFs for high yield corporate bonds..:..

Dominik Poiger, CFA, trader/ETF portfolio management at VanEck


 

The VanEck VectorsTM Global Fallen Angel High Yield Bond UCITS ETF and the VanEck VectorsTM Emerging Markets High Yield Bond UCITS ETF are now listed on the London Stock Exchange.

Global Fallen Angel High Yield Bonds

The VanEck Vectors™ Global Fallen Angel High Yield Bond UCITS ETF (ticker USD: GFA LN, ticker GBP: GFGB LN) enables investors to benefit from temporary misvaluation as a result of credit rating downgrades.

The ETF is based on the ICE BofAML Global Fallen Angel High Yield Index. This tracks the performance of corporate bonds that were rated as investment-grade at the time of issuance but have since been downgraded to non-investment grade. In order to be included in the index, the bond must have a minimum term of 18 months. The minimum remaining term at the point of inclusion must be 12 months. In addition, the minimum issue size is US$250 million/€250 million or £100 million/C$100 million.

“As a result of the rating downgrades, corporate bonds are often sold off because their risk profile no longer meets the requirements of institutional investors or indices,” explains Dominik Poiger, CFA, trader/ETF portfolio management at VanEck. “This often results in a temporary price distortion. On average, fallen angels reach their lowest valuation approximately six months after the rating downgrade, after which the recovery phase begins. The valuation level from before the downgrade is often achieved again.”

The fallen angels investment concept is based on empirically provable patterns of behaviour by corporate bonds in rating downgrades. The concept has historically outperformed the global high yield market in both absolute and risk-adjusted terms.

The VanEck Vectors™ Global Fallen Angel High Yield Bond UCITS ETF is the first UCITS-compliant ETF to realise the fallen angels investment concept with a global investment horizon without excluding any individual regions or countries.

Emerging Markets High Yield Bonds

The VanEck Vectors™ Emerging Markets High Yield Bond UCITS ETF (ticker USD: HYEM LN, ticker GBP: HYGB LN) offers investors access to high yield bonds from emerging markets. It is based on the ICE BofAML Diversified High Yield US Emerging Markets Corporate Plus Index which tracks the performance of corporate bonds denominated in US dollars with an average credit rating below investment grade. Issuers from countries in the Eurozone, the USA, Japan, the UK, Canada, Australia, New Zealand, Switzerland, Norway and Sweden are excluded. In order to be included in the index, the bonds must have a remaining term of at least 12 months and an issue size of at least US$300 million. In addition, the index only includes bonds with a fixed coupon.

“The market for high-yield bonds from emerging markets is becoming increasingly efficient. In the past few years alone, the volume on the market has doubled and is expected to continue to grow,” says Dominik Poiger, CFA, trader/ETF portfolio management at VanEck. “Emerging markets high-yield bonds are thus an attractive asset class for the long-term, offering a similarly high yield to US high-yield bonds, but with a lower duration and better credit rating.”

The VanEck Vectors™ Emerging Markets High Yield Bond UCITS ETF is the first UCITS-compliant ETF to give investors direct access to the market for EM high-yield corporate bonds.

Product information overview:

Product

VanEck Vectors™ Global Fallen Angel High Yield Bond UCITS ETF

VanEck Vectors™ Emerging Markets High Yield Bond UCITS ETF

Ticker (LSE)

GFA LN (USD)
GFGB LN (GBP)

HYEM LN (USD)
HYGB LN (GBP)

ISIN

IE00BF540Z61

IE00BF541080

Management company

VanEck Investments Ltd.

VanEck Investments Ltd.

Custodian

BNY Mellon Trust Company (Ireland) Limited

BNY Mellon Trust Company (Ireland) Limited

Domicile

Ireland

Ireland

Index ticker

HWFA

EMLH

Index provider

ICE Data Indices, LLC

ICE Data Indices, LLC

Rebalancing frequency

Monthly

Monthly

Product Structure

Physical, optimized

Physical, optimized

Launch date

19 March 2018

20 March 2018

Total expense ratio

0.40% p.a.

0.40% p.a.

Income Treatment

Reinvestment

Reinvestment

Index Effective Duration (as of 14 March 2018)

4.98 years

3.78 years

Index Yield to Maturity (as of 14 March 2018)

4.94%

6.38%

Index Years to Maturity (as of 14 March 2018)

7.43

5.21

Source: ETFWorld

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