BlackRock expands fixed income range with high yield ETF

BlackRock has launched an exchange traded fund (ETF) offering investors exposure to ‘Fallen Angel’ bonds.

A ‘Fallen Angel’ refers to a bond that has been downgraded from investment grade to high yield, and can appeal to investors seeking to take advantage of the price anomaly that can arise following a downgrade of these securities.

The iShares Fallen Angels High Yield Corporate Bond UCITS ETF (WING) provides exposure to global bonds that were once rated investment grade and have since been downgraded to high yield status. The underlying index of the fund has exposure to over 450 holdings[1], with exposure of each issuer capped at 3% of the total market value to ensure diversification.

The fund’s underlying index is rebalanced monthly and emerging market issuers and bonds rated below B- are excluded as part of its screening process.

Brett Olson, Head of iShares EMEA Fixed income, said: “Bond ETFs have had a record start to the year, with year-to-date net global flows at over $60bn. We are seeing investors using ETFs to access assets across the fixed income spectrum as they seek to diversify their portfolios against a challenging low yield backdrop, and do so at a lower cost.

“Our clients tell us that they want more innovative fixed income products as they seek to boost the potential for yield in outperformance.  We are responding to this demand, with this fund taking the number of European-domiciled iShares fixed income ETFs to 89. Through this fund, investors have the opportunity to capitalise on the potential additional performance that can result from the historical fallen angel bonds price anomaly.”

The iShares Fallen Angels High Yield Corporate Bond UCITS ETF is physically replicating, meaning it buys the securities of the index. It has a total expense ratio of 0.50%.