BlackRock has expanded its fixed income rage of exchange traded funds with the launch of an ETF offering exposure to so-called ‘fallen angel’ bonds – bonds which have been downgraded from investment grade to high yield.
The underlying index of the new iShares Fallen Angels High Yield Corporate Bond UCITS ETF (WING) has exposure to over 450 holdings. Diversification is ensured by a cap of three per cent of total market exposure for each issuer.
The index is rebalanced monthly and emerging market issuers and bonds rated below B- are excluded as part of its screening process.
Brett Olson, head of iShares EMEA fixed income, says: “Bond ETFs have had a record start to the year, with year-to-date net global flows at over USD60 billion. 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.”
