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iShares iBoxx High Yield ETF to rebalance after index changes


Markit Group has made changes to the methodology of the iBoxx USD Liquid High Yield Index.

Markit Group has made changes to the methodology of the iBoxx USD Liquid High Yield Index.

Barclays Global Fund Advisors intends to continue to manage the iShares iBoxx USD High Yield Corporate Bond Fund and seek investment results that correspond generally to the price and yield performance, before fees and expenses, of the US dollar high yield corporate bond market as defined by the iBoxx USD Liquid High Yield Index.

BGFA also intends to manage the fund in a manner designed to minimize turnover and maximize cost- and tax-efficiencies.

The index methodology change took effect at the index’s 30 June 2009 rebalancing, and is expected to be completed over a six-month period. The risk characteristics and sector allocations are generally projected to remain similar.

Other key highlights of the index methodology change include:

• Securities must be USD400m par or larger, while the old methodology was USD200m par or larger
• There will be an issuer minimum of USD1bn par or larger, while the old methodology had no issuer level minimum
• There will be no limit on number of securities in index, whereas the old index had a cap of 50 bonds
• The weighting methodology has changed to modified market value weighted from equally weighted by par value

‘We believe that the new methodology will provide investors with a more accurate reflection of the high yield market,’ says Noel Archard (pictured), head of US iShares product research and development. ‘During and subsequently to the index transition period, we expect the iShares iBoxx USD High Yield Corporate Bond Fund to continue to provide liquidity and tight bid/ask spreads.’

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