BlackRock has launched an ETF to track fallen angel bonds.
The iShares Fallen Angels High Yield Corporate Bond Ucits ETF will have exposure to global bonds that were once rated investment grade and then downgraded to high yield.
The index of the fund will have an exposure to 450 holdings, with an allocation not higher than 3 per cent for each issuer to ensure diversification. The ETF will exclude emerging market issuers and bonds rated below B-.
iShares head of fixed income for EMEA Brett Olson says: “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.
“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. Through this fund, investors have the opportunity to capitalise on the potential additional performance that can result from the historical fallen angel bonds price anomaly.”
The fund’s total expense ratio is 0.50 per cent.