Pimco and Source ETF have launched a Sterling-hedged and distribution-focused version of a $1.2bn (£790m) ETF as it aims to protect the fund from US Dollar exposure.
The GBP-hedged version of the Pimco Short-Term High Yield Corporate Bond Index Source UCITS ETF will use currency futures to hedge to Sterling and will focus on income distribution as well, giving investors monthly payouts.
The ETF will also focus on bonds with shorter maturities in order to boost yields.
Pimco Europe head of product management Mike Trovato says: “Investors who want to enhance the yield in their portfolio may wish to consider the short-term high-yield segment, as it offers a similar level of yield as the broader high-yield market.
“In addition, with the probability of tightening by the US Federal Reserve, it may also be worth focusing on bonds with shorter maturities, as it reduces the portfolio’s sensitivity to rising interest rates. This ETF combines both of these elements.”
The GBP-hedged fund is a smart passive fund and uses a risk factor approach based on the Bank of America Merrill Lynch US High Yield 0-5 Year Index.
The fund has management fees of 0.60 per cent.