iShares unveils currency-hedged global fixed income ETFs on LSE

Jun 26th, 2013 | By | Category: Fixed Income

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iShares, the exchange-traded funds (ETF) platform of asset management giant BlackRock, has announced the launch of two new funds on the London Stock Exchange (LSE): the iShares Global High Yield Corp Bond GBP Hedged UCITS ETF (GHYS) and the iShares Global Corporate Bond EUR Hedged UCITS ETF (CRPH).

iShares unveils currency-hedged global fixed income ETFs on LSE

iShares has unveiled a pair of currency-hedged global fixed income ETFs on the London Stock Exchange which reduce the effects of currency fluctuations on investment returns.

The two physically-replicated, monthly currency-hedged fixed income funds, the first of their type from iShares, aim to reduce the impact currency fluctuations can have on returns when investing in fixed income globally.

When investing internationally, investors are exposed to two main risks: movement in the value of the underlying asset and fluctuation between their portfolio base currency and the currency in which assets are denominated. This currency exposure can introduce unintended risk into a portfolio especially during periods of increased currency volatility. Hedging currency exposure allows investors to separate and manage these risks effectively.

Commenting on the launch, Stephen Cohen, Head of Investment Strategy at iShares EMEA, said: “We’re seeing a long-term trend for investors to diversify their fixed income allocations globally whilst at the same time there’s also been heightened volatility in FX markets. These factors are creating demand for simple and effective currency hedged solutions and we’ve designed these new funds with this client need in mind.”

He added: “The funds are our first currency-hedged bond ETFs in Europe and build on our existing range of European currency-hedged equity ETFs. They enable investors to hedge the currency of their investment returns in a single transaction without having to monitor and maintain a separate currency hedge – ideal for those who do not have hedging capabilities in-house.”

The iShares Global High Yield Corp Bond GBP Hedged UCITS ETF aims to track the performance of the Markit iBoxx Global Developed Markets Liquid High Yield Capped (GBP Hedged) Index, an index designed to provide a balanced representation of the global developed high-yield corporate market by the means of the most liquid high-yield corporate bonds available. The maximum original time to maturity for bonds held is 15 years, and the minimum time to maturity is 1.5 years for new bonds to be included and 1 year for bonds that are already held within the index. For diversification purposes, the weight of each issuer in the index is capped at 3%. The fund has a total expense ratio (TER) of 0.55%

The iShares Global Corporate Bond EUR Hedged UCITS ETF aims to track the performance of the Barclays Global Aggregate Corporate Index (EUR hedged), an index offering exposure to investment grade corporate fixed rate bonds issued by corporations in emerging and developed markets worldwide, with a minimum maturity of at least 1 year. It has a TER of 0.25%.

Both funds are eligible for inclusion in ISAs and SIPPs, and are seeking UK Reporting Fund Status.

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