BlackRock has launched sterling-hedged share classes for two of its sustainability-themed fixed income ETFs listed in Europe.
The new share classes allow investors to hedge currency exposure relative to pound sterling.
The funds provide exposure to euro or US dollar-denominated corporate bonds from issuers that have been screened by environmental, social, and governance (ESG) criteria.
The new share classes allow GBP investors to access these strategies while hedging currency exposure back to pound sterling.
Euro corporate bond ETF
The iShares € Corp Bond ESG UCITS ETF is linked to the Bloomberg Barclays MSCI Euro Corporate Sustainable SRI Index, an index developed by Bloomberg Barclays and MSCI‘s ESG unit.
The starting universe for the index is the Bloomberg Barclays Euro Corporate Index which includes euro-denominated, investment-grade bonds with maturities greater than one year and amounts outstanding of at least €300 million.
The methodology then excludes issuers that do not respect UN Global Compact principles as well as those companies that are involved in sectors such as alcohol, gambling, pornography, tobacco, nuclear, genetically-modified organisms, and weapons.
Companies are then further analyzed according to their MSCI ESG scores with only those scoring ‘BBB’ (average) or higher making the cut – a firm scores higher on the scale if it has strong employee rights, low levels of corruption, and a strong corporate governance structure. It also ranks well if it does not waste resources, it promotes education, safeguards animal rights and protects the environment.
The remaining constituents are weighted by market value to arrive at the final index.
The fund is listed on London Stock Exchange and Borsa Italiana in euros under the tickers SUOE LN and SUOE IM, respectively, and comes with a total expense ratio (TER) of 0.15%. The new GBP-hedged share class trades in pound sterling on LSE under the ticker SUOG LN and is slightly more expensive with a TER of 0.17%.
The fund houses €630 million in assets under management.
US dollar corporate bond ETF
The iShares $ Corp Bond 0-3yr ESG UCITS ETF tracks the Bloomberg Barclays MSCI USD Corporate 0-3 Sustainable SRI Index.
The index follows a similar methodology as its euro counterpart but selects its constituents from a universe of US dollar-denominated, investment-grade bonds with maturities of less than three years.
The fund is available to trade on LSE in US dollars (Ticker: SUSU LN) and on Xetra in euros (SNAV GY). The new GBP-hedged share class trades in pound sterling on LSE under the ticker SGSU LN and has a TER of 0.17%.
It houses $40m in AUM and comes with a TER of 0.15%.