BlackRock, the asset manager behind the iShares range of exchange-traded funds, recently unveiled a new ETF for US dollar-based investors looking for international high-yield corporate bond exposure without the currency risk associated with investing overseas.
Matthew Tucker, Head of iShares Fixed Income Investment Strategy.
Listed on the NYSE Arca, the iShares Currency Hedged Global ex USD High Yield Bond ETF (HHYX) tracks the Markit iBoxx Global Developed Markets ex-US High Yield Index, which represents euro, pound sterling and Canadian dollar-denominated, high-yield corporate bonds, while mitigating currency risk against the US dollar.
The fund is the first currency-hedged fixed income ETF offered by iShares.
The fund complements the iShares Global ex USD High Yield Corporate Bond ETF (HYXU), launched in April 2012, which has amassed over $234m in assets under management. Lately, the performance of this unhedged version of the fund has been adversely affected by the strengthening dollar, thereby pointing to the benefits of the new currency-hedged version should the appreciate of the greenback continue
Matthew Tucker, Head of iShares Fixed Income Investment Strategy at BlackRock said: “We have seen significant US dollar strength driven by global central bank policy divergence, and this could continue to impact US dollar returns on international investments. Given this backdrop, we are pleased to now be able to provide US investors with the flexibility to hedge some or all of the currency exposure of an international high-yield bond investment with our iShares fixed income ETF suite.”
The fund’s characteristics are as follows: Country exposure is tilted towards Italy (22.2%), followed by the United Kingdom (15.2%), Germany (15.0%), France (12.1%) and the US (6.1%); sector exposures are presently most weighted towards banking (18.8%), communications (17.1%), consumer cyclical (16.8%), capital goods (16.6%) and consumer non-cyclical (9.2%); individual bond exposure is very well diversified with some 500 holdings, the top five issuers of which are Telecom Italia (2.9%), Fiat Chrysler (2.8%), Lafarge (2.4%), Intesa Sanpaolo (2.3%) and Unicredit (2.2%).
The portfolio currently has a weighted average maturity of 4.2 years, a weighted average yield-to-maturity of 4.3% and an effective duration of 3.7 years.
The fund trades in US dollars on the NYSE Arca and has a total expense ratio of 0.43%.
(Data as of 18 August)