VanEck cross-lists two high-yield bond ETFs on Xetra

Apr 6th, 2018 | By | Category: Fixed Income

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VanEck has cross-listed two high-yield fixed income ETFs onto Xetra: the VanEck Vectors Emerging Markets High Yield Bond UCITS ETF (HY3M GY) and the VanEck Vectors Global Fallen Angel High Yield Bond UCITS ETF (GFEA GY).

VanEck cross-lists two high-yield bond ETFs

VanEck has cross-listed two high-yield bond ETFs onto Xetra.

The funds debuted on the London Stock Exchange last month.

HY3M tracks the ICE BofAML Diversified High Yield US Emerging Markets Corporate Plus Index, providing investors with access to US-dollar denominated fixed income corporate bonds and quasi-government debt securities from emerging markets.

The bonds must have a sub-investment grade rating, a minimum term of twelve months and be traded on a US or Eurobond market.

Turkey represents the largest weighting in the index by country at 10.0%, followed by Brazil at 9.7% and China at 9.6%.

The fund’s base currency is euro and it has a total expense ratio of 0.40% per annum. Income generated by the portfolio is accumulated within the fund.

GFEA tracks the ICE BofAML Global Fallen Angel High Yield Index. This index offers investors access to the performance of ‘fallen angels’ – high-yield corporate bonds and quasi-government debt securities that were issued with investment-grade status but have subsequently been downgraded to sub-investment grade.

The strategy is based on the premise that the overly negative sentiment surrounding a downgrade into junk status causes fallen angels to be regularly oversold as investors (often forced by their investment mandate) sell en masse prior to and at downgrade, leading to a price anomaly.

The bonds may be denominated in US dollars, Canadian dollars, sterling or euros and must be traded on a US or Eurobond market. The minimum issue size must be $250 million, €250m, £100m, or C$100m. Qualifying securities must have at least 18 months to final maturity at the time of issuance and a fixed coupon schedule.

The index is highly exposed to the US which represents 27.5% of its total weighting, followed by Brazil at 17.7% and Italy at 10.0%.  

The fund has a TER of 0.40% and is comprised of 64 individual holdings.

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