Pimco and Source have launched an exchange-traded fund (ETF) that gives physical access to the short maturity sector of the high yield universe.
The Pimco Short-Term High Yield Corporate Bond Index Source ETF tracks the BofA Merrill Lynch 0-5 Year High Yield Constrained Index, which contains 821 securities.
Pimco says its objective is to closely track the index while reducing transaction costs. At the same time, Pimco says, the ETF aims to avoid the relatively small universe of illiquid bonds and issuers whose viability is in doubt.
Vineer Bhansali, managing director at Pimco and portfolio manager, says the shorter-dated high yield corporate bond sector has delivered “similar yields, lower volatility and a lower correlation to equities” than longer-dated high yield corporate bonds over the past 15 years.
“Returns on a diversified basket of high yield bonds tend to be less volatile than equities over a long holding horizon because the income component of the return is typically larger than that of equities, providing an added measure of stability,” Bhansali says.
The ETF is registered for sale in the UK, Ireland, Austria, France, Finland, Germany, Italy, the Netherlands, Norway and Sweden.
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