Invesco has launched two passively managed fixed income ETF strategies targeting enhanced yield within core investment-grade credit allocations.
The Invesco IG Corporate Bond Yield Plus Ucits ETFs offer exposure to euro- or US dollar-denominated investment-grade corporate bonds, tracking the iBoxx indices that aim to increase income within the investment-grade universe.
Each ETF follows the iBoxx Corporates Investment Grade Spread Select Top 50% TCA Index for either dollar or euro bonds. The indices seek to enhance yield versus the parent iBoxx Corporates Index by selecting bonds with the highest “benchmark spread” — the premium over a comparable risk-free bond with the same maturity.
Constituents are reviewed quarterly. At each rebalance, bonds in the parent index are split into 20 groups by sector and remaining maturity, ranked by benchmark spread, and the top 50% in each group are selected. The index remains market value weighted, maintaining broad investment-grade exposure while introducing a systematic yield tilt.
Deficits, geopolitics shift UK fixed income appetite
Matthew Tagliani, head of Emea ETF product at Invesco, said: “While investment grade credit was one of the most popular fixed income categories for European ETF investors last year, strong demand for non-core credit products suggests investors are looking to further improve their returns. Our approach with these new ETFs aims to enhance the return of the core allocation itself by systematically applying a well-established strategy from active management. By carefully controlling the risk versus the traditional benchmark, we look to provide a cost-effective, rules-based, passive index product in an efficient ETF structure.”
Paul Syms, head of Emea ETF fixed income and commodity product management at Invesco, said: “By following an intelligent indexing approach that systematically selects the issues with the highest spreads within each sector and maturity bucket, we are able to deliver a diversified solution that provides similar characteristics, such as sector allocation and interest rate risk, to the parent index. As a result, these new launches aim to offer similar volatility to the benchmark but with higher total returns and with the benefits of our cost-efficient ETF structure.”
