DWS‘s Xtrackers EUR Corporate Bond UCITS ETF (XBLC GY) has broken through €1 billion in assets under management.

Simon Klein, DWS’s Head of Passive Sales for Europe and Asia Pacific.

The fund, which provides access to the euro corporate bond market, has reached the milestone through a combination of healthy market performance and strong investor inflows.

Demand for European corporate debt has been robust this year, driven by investors searching for yield and renewed expectations of lower interest rates.

This has driven yields lower, leading to a gain for the fund of 7% year-to-date (as of 8th August).

As demand for euro corporate debt has increased, the ETF has clearly been a favoured vehicle for exposure to the segment, recording €277.5 million net inflows in the first seven months of the year, including flows of approximately €100 million in June and €50m in July.

Flows have reversed slightly in August on the back of some profit-taking, but, otherwise, May has been the only full month this year where the fund recorded a net outflow, shedding just €4.4m.

The fund’s success can be explained by its underlying index, transparency, liquidity, and low cost.

The underlying reference benchmark is the widely followed Bloomberg Barclays Euro Aggregate Corporate Index, consisting of over 2,500 investment-grade, EUR-denominated, fixed-rate corporate bonds with maturities greater than one year. The index is a leading barometer for the performance of the EUR corporate bond market.

The fund mirrors the index via direct physical replication using an optimised sampling approach. This ensures tight tracking whilst maintaining high liquidity levels and keeping replication costs down.

And with an expense ratio of just 0.16% – cheaper than its direct rival the iShares Core € Corp Bond UCITS ETF (IEAC NA), which charges 0.20% – investors clearly view the fund as a low-cost and efficient means of obtaining exposure to the important euro IG corporate bond universe.

Simon Klein, Head of Passive Sales, Europe & Asia Pacific at DWS, commented, “The passive index investing and sales teams have worked hard to make this product a success, and the flows it has attracted demonstrate the fund’s high tracking quality and access efficiency within its product segment.”

Klein also notes that liquidity tends to attract more liquidity in the fixed income space and expects the crossing of the important €1bn milestone to make the fund even more attractive to investors.

“Investors considering the product and seeing that it has over €1bn in assets and is actively traded will be more likely to go ahead and make their investment, so we expect the ETF to attract even more flows,” he said.

The fund is listed on Xetra, SIX Swiss Exchange, London Stock Exchange, and Borsa Italiana. Income is capitalised.

Assets under management for Xtrackers EUR Corporate Bond UCITS ETF (in Euros).