BlackRock has launched an exchange traded fund (ETF) offering investors exposure to ‘fallen angel’ bonds.
The iShares Fallen Angels High Yield Corporate Bond Ucits ETF (WING) provides exposure to global bonds that were once rated investment grade and have since been downgraded to high yield status.
The underlying index of the fund has exposure to over 450 holdings, with exposure of each issuer capped at 3% of the total market value to ensure diversification.
The fund’s underlying index is rebalanced monthly and emerging market issuers and bonds rated below B- are excluded as part of its screening process.
“Bond ETFs have had a record start to the year, with year-to-date net global flows at over $60bn. We are seeing investors using ETFs to access assets across the fixed income spectrum as they seek to diversify their portfolios against a challenging low yield backdrop, and do so at a lower cost,” said Brett Olson, head of iShares EMEA Fixed Income.
“Our clients tell us that they want more innovative fixed income products as they seek to boost the potential for yield in outperformance. We are responding to this demand, with this fund taking the number of European-domiciled iShares fixed income ETFs to 89,” Olson said.
The iShares Fallen Angels High Yield Corporate Bond Ucits ETF is physically replicating, meaning it buys the securities of the index. It has a total expense ratio of 0.50%.