BlackRock has launched an exchange-traded fund (ETF) that invests in formerly investment grade bonds that have fallen to ‘junk’ status – so-called fallen angels.
The iShares Fallen Angels High Yield Corporate Bond Ucits ETF provides exposure to about 450 global bonds in the Barclays Global Corporate ex-EM Fallen Angels Index.
Exposure to each issuer is capped at 3% of total market value to ensure diversification and bonds rated below B- are excluded.
Downgrading can severely depress a bond’s price as investment grade funds become forced sellers, which creates buying opportunities for others.
The ETFs use physical replication and has a total expense ratio of 0.5%.
Bond ETFs have had a record start to the year, said BlackRock, with year-to-date net global flows at over $60 billion (€54 billion).
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