Exchange Traded Fund (ETF) provider iShares is launching two fixed-income ETFs designed to provide investors with an element of safety in turbulent markets.
The Global Inflation-Linked Bond fund offers exposure to the Barclays World Government Inflation-Linked Bond Index which gives investors a degree of protection against global inflation in a single trade, iShares says.
The index currently consists of 90 bonds representing 10 different countries and seven different currencies.
Meanwhile, the iShares Euro Covered Bond provides investors with liquid exposure to a range of European covered bonds based on the Markit iBoxx € Covered index.
There are currently 448 bonds in the index, 93% of which are AAA-rated, with an average annual yield of 5.25% and duration of more than four years.
Covered bonds are securities issued by financial institutions which have a “cover pool” of collateral to act as a credit enhancement giving them a higher rating than standard bonds of the same institution.
Alex Claringbull, senior fixed income portfolio manager at iShares, says: “These new funds are ideally suited to today’s economic climate as investors return to safety in the face of volatile market conditions – and they offer this safety in the transparent, liquid and diversified structure of an ETF.
“The covered bond market, the fourth biggest bond market in Europe after German, French and Italian sovereigns, offers investors a high level of liquidity. Covered bonds also offer an attractive yield pick-up over sovereign, supranational and agency bonds.”
The launches take the total number of iShares ETFs listed on the London Stock Exchange to 64, and boosts the number of iShares ETFs available throughout Europe to 144.
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