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Update: iShares Euro Corporate Bond ex-Financials 1-5yr UCITS ETF

Dieser Obligationen-ETF begrenzt durch die kürzeren Laufzeiten das Durationsrisiko. Anleger sollten allerdings das hohe Gewicht im Industriesektor und bei Versorgern. 

Rolle im Portfolio

The iShares Barclays Capital Euro Corporate Bond Ex-Financials 1-5 ETF offers investors exposure to EUR-denominated investment-grade corporate bonds with a 1-5 year maturity issued by industrial and utility companies.

Investors have historically chosen to invest in corporate bonds for their propensity to generate steady income streams at higher yields than government-issued debt and to be less volatile than equities. By excluding volatile financial debt and limiting the duration of the holdings, this ETF occupies the less risky end of the corporate bond spectrum.

This ETF allows investors to diversify asset exposure within a fixed income portfolio, potentially enhancing overall yield, while minimising the risks associated with holding corporate bonds. Financial debt occupies the riskier end of the corporate debt spectrum, and through exclusion can reduce the volatility of a fixed income portfolio. This ETF may also be deployed to underweight the financial corporate debt element of an already diversified fixed income portfolio, thereby reducing its risk.

The short maturity focus of this ETF allows investors to deploy it tactically in a fixed income portfolio as a duration-management tool; specifically shortening strategies to protect against future interest rate rises. For example, as of this writing, this ETF has a modified duration of ~2.8. On that basis, a duration-shortening tactical use of this ETF would only be effective for portfolios with a modified duration greater than ~2.8.

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Fundamentale Analyse

Global short term-interest rates have remained close to zero for the last five years and have fuelled what some believe to be a bond bubble. With short-term interest rates now largely unable to drop in nomimal terms the question has become when, not if, they will be raised. This leaves bondholders waiting for ‘the other foot to drop’, as rising yields on European sovereign debt should exert upwards pressure on corporate debt yields, as they adjust to maintain a risk spread over the new ‘risk-free’ rate, thus driving down prices of corporate paper. There is a genuine risk that the eventual raising of short-term rates, if administered indelicately, could be accompanied by a stampede of investors rushing to exit their fixed income positions.

For all the risks connected with rising rates, it is unlikely that interest rates in the Eurozone will increase in the short-term, in-part, due to fears of deflation. Eurozone inflation has been running below the ECB’s price stability target of 2.0% since early 2013, hitting a low of 0.5% by end H1 2014. The ECB lowered its key interest rate to 0.15% in June 2014 while turning to alternative stimulus measures, including cutting its deposit rate to -0.1%, in order to stave off deflation and encourage lending. A brief period of deflation may actually boost returns for European corporate bond holders.  Under these circumstances, the real value of the debt repayments increase over time and the price will theoretically rise accordingly. However, it must be noted that extended periods of deflation may have destabilising effects on an economy, which in turn is likely to negatively impact the creditworthiness of corporate bond holdings, driving prices down.

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Indexkonstruktion

The Barclays Capital EUR Corporate Bond Ex-Financials 1-5 Index measures the performance of fixed-rate investment-grade EUR-denominated corporate bonds from industrial and utility corporations issued in the Eurobond and Eurozone markets irrespective of issuing country. The index only considers issuances with maturity of at least one year and up to, but not including five years. Bonds with equity-type features as well as floating rate notes and private placements are excluded. There is no limit on the number of bonds eligible for the index. The distribution by sector is roughly 85% in industrials and 15% in utilities. Eligible bonds must have a minimum time to maturity of one year and a minimum outstanding of EUR 300m. The relatively low minimum outstanding allows a broad geographical diversification in terms of issuers. Bonds are priced daily by Barclays Capital traders or third-party vendors. Analytical values are calculated daily on bid prices as of 16:15 London time. The index is rebalanced monthly on the last business day of the month. Income arising from coupon and redemptions is held in the index as non-invested cash until rebalancing when it is then removed from the index.

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Fondskonstruktion

iShares uses physical replication to track the performance of the Barclays Capital Euro Corporate Bond Ex-Financials 1-5 index. As the reference index holds a fairly large number of components, iShares uses statistical sampling in order to construct the fund. In terms of maturity distribution, the fund has a clear short-term maturity bias (e.g. between 40% and 50% of the fund constituents have a maturity below three years). iShares engages in securities lending in order to improve the tracking performance for this fund. The maximum amount available for loan is capped at 50% of AUM per fund. In the year to end Q1 2014, this fund generated a 0.01% return by loaning an average of just 3.5% of AUM. iShares’ parent company BlackRock acts as lending agent. Lending operations are hedged by taking UCITS-approved collateral greater than the loan value and by revaluing loans and collateral on a daily basis. The collateral is held in a ring-fenced account by a third party custodian. The degree of over-collateralisation is a function of the assets provided as collateral, but typically ranges from 102.5% to 112%. Gross lending revenue is split 62.5/37.5 between the ETF and BlackRock, respectively. The fund distributes dividends on a semi-annual basis; historically this has occurred in June and December.

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Gebühren

iShares charges a total expense ratio (TER) of 0.20% for this ETF, which is the average for ETFs offering exposure to the EUR-denominated non-financial corporate bond market. It should be remembered that there are additional, investor-specific costs associated with trading the ETF, such as bid/offer spreads and brokerage commissions, which should be factored into an investment decision. There are also rebalancing costs whenever the index changes composition.

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Alternativen

As of this writing, there is no like-for-like competitor to the iShares BarCap Euro Corporate Ex-Financials 1-5y ETF. There are a number of ETFs providing similar sector exposure. However, they all cover the entire maturity spectrum. Amongst these, the most popular in AUM terms is the iShares Euro Corporate Bond ex-Financials ETF (TER 0.20%). Lagging in AUM we find the swap-based db X-trackers iBoxx EUR Liquid Corporate Non-Financials ETF and Lyxor Euro Corporate bond ex-financial ETF, both also charging a TER of 0.20%. Further down the line in AUM terms, but with a lower TER of 0.16% is the Amundi Euro Corporate Ex-Financials iBoxx ETF (TER 0.16%).

iShares also offers the BarCap Euro Corporate 1-5y ETF (TER 20%), which caters to those investors wishing to include financial debt exposure while limiting the maturity of their holding.

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Über den Autor

Morningstar ETF Analysts  research hundreds of ETFs available to European investors. The Morningstar Rating for ETFs is based on a risk-adjusted performance measure.