Lyxor has launched a new short-dated US Dollar & Euro High Yield ETF, writing that they offer investors a defence against rising interest rates. The firm writes that their focus on one to three-year High Yield bonds is unique on the US Dollar side, and means their ETFs have a lower duration, and are less sensitive to interest rate changes than others.
Lyxor’s new Lyxor BofAML $ Short Term High Yield Bond UCITS ETF and Lyxor BofAML € Short Term High Yield Bond UCITS ETF have a Total Expense Ratio of just 0.30 per cent, making them the lowest cost in Europe. For those concerned that the Euro could strengthen against the Dollar, Lyxor also offers a monthly hedged version of the US Dollar product for 0.40 per cent.
The Bank of America Merrill Lynch indices used by Lyxor provide exposure to 248 bonds in the US Dollar version, or 93 in the Euro version2. The indices select High Yield bonds with between one and three years left until final maturity, and a minimum outstanding amount of USD250 million. Issuers are capped at 2 per cent for the US Dollar, and 3 per cent for the Euro indices to maintain diversification in the portfolio.
High yield ETFs have attracted EUR1.3 billion in new assets this year, taking the total assets under management to EUR14.6 billion. This is an area where passive investing makes sense. Data from Lyxor shows only 35 per cent of active fund managers in the Euro High Yield space outperformed their benchmark over one year and 14 per cent over 10 years. US managers did better with 58 per cent outperforming last year.
François Millet (pictured), Head of Product Development at Lyxor says: “Our new ETFs provide a vital source of yield for investors concerned by rising rates, or a strengthening Euro. With the lowest TERs in Europe, these can be an attractive option for investors searching for yield”.
Lyxor has been building its fixed income ETF range in recent years, now ranking as the second largest provider in Europe for Fixed Income ETFs with over EUR13.9 billion in assets under management.
