db X-trackers has launched a range of ETFs designed to provide financially sophisticated investors with exposure to North American high yield and investment grade credit indices.
The London-listed ETFs, which are the first of their kind globally, let institutional investors take pure credit risk exposure – as opposed to the credit plus interest rate risk generated through investing in corporate bond indices – to the North American corporate credit market. The ETFs track the performance of the Markit CDX North America Investment Grade and Markit CDX North America High Yield credit default swap (CDS) indices.
The suite of products give investors the flexibility to take long exposure to liquid US corporate credit risk, or to hedge their credit risk using the daily short versions of the ETFs, while daily leveraged exposures can also be taken.
“By providing access to these indices in ETF format we are opening up parts of the corporate credit market that are not easy to trade, even for large institutional investors. ETFs offer a liquid and hassle free route to taking these exposures, while investors will also benefit from the usual competitive fees and high levels of transparency associated with db X-trackers ETFs,” says Manooj Mistry, head of db X-trackers for the UK. “Our range of daily short ETFs meanwhile aims to provide those investors holding a portfolio of investment grade or high yield bonds with a tool for hedging their positions against market drawdowns.”
The CDS market is generally seen as the most liquid way to receive exposure to the corporate credit market. The investment grade index references 125 of the most liquid investment grade North American CDS securities, while the high yield index references 100 CDS securities, again chosen on a liquidity basis.