Amundi brings euro liquid corporate bond ETF to market

Nov 10th, 2015 | By | Category: Fixed Income

Amundi, a leading European provider of exchange-traded funds, has added to its fixed income ETF range by launching an ETF offering exposure to the Markit iBoxx EUR Liquid Corporates BBB Top 60 index.

Amundi brings liquid corporate bond ETF to market

Amundi’s new ETF provides exposure to a diversified basket of liquid euro-denominated corporate bonds.

According to Amundi, the fund has been designed as an asset allocation tool for investors seeking to capture yield on euro credit markets, as European issuers still benefit from strong fundamentals and favourable environment with ECB Quantitative Easing.

Valerie Baudson, CEO at Amundi ETF, Indexing and Smart Beta, said: “With over €10bn of inflows witnessed on corporate bond ETFs in Europe YTD 2015, investors’ interest for yield in fixed income remains very strong. We are delighted to provide investors with this unique yield enhancing tool in the Investment Grade universe, with lower risk than in the high yield universe.”

The Markit iBoxx EUR Liquid Corporates BBB Top 60 index reflects the performance of euro-denominated BBB rated corporate debt, focusing on the most liquid country-diversified corporate bonds. The index methodology selects a maximum of 60 liquid corporate bonds, denominated in euros, with ratings BBB- at Standard & Poor’s, BBB- at Fitch and Baa3 at Moody’s.

The fund addresses a key concern amongst fixed income ETF investors: the liquidity of the underlying securities. Bond market liquidity has been a rising issue for market participants since the global financial crisis as increased bond issuance has combined with lower trading volumes (the result of regulations impeding banks’ from holding bonds on their balance sheets). Broad benchmark indices generally consist of a large number of bonds and tracking such benchmarks may therefore incur substantial costs in attempting to replicate or hedge the individual bonds in the portfolio. Furthermore, bonds with special features or smaller amounts outstanding usually suffer from illiquid trading, resulting in relatively large bid-ask spreads. The Liquid indices from Markit are intended to address these deficiencies by limiting the number of bonds per index and excluding special bond types, thus reducing tracking and hedging costs.

The fund has been listed on the Euronext and carries a total expense ratio of 0.20%. Amundi plans to cross-list the fund on the major European stock exchanges.

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