Un ETF issuer offers exchange traded funds (ETF) with European bonds of companies that are not predominantly active in the financial sector…
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ETFlab iBoxx € Liquid Non-Financials Diversified (ISIN: DE000 ETFL38 3)
The Munich specialist in exchange traded funds ETFlab Investment GmbH offers access to a large selection of euro corporate bonds through its ETFlab iBoxx € Liquid Non-Financials Diversified fund, which contains bonds of companies that are not predominantly active in the financial sector. “In this respect, we are responding to demand from investors, who as a result of the financial crisis do not invest in bonds of issuers out of the financial sector for various reasons,” explains Andreas Fehrenbach, ETFlab’s Managing Director. But even so investors will “be broadly diversified and enjoy a significantly higher yield than with government bonds; at the moment the spread is 100 basis points,” the ETF expert points out. With respect to corporate bonds, it is generally recommended to spread one’s investments across industries and countries. “ETFs are perfect in this regard, because the investor acquires an entire bond portfolio with just one trade,” stresses Fehrenbach.
In addition, the ETF expert points out that corporate bonds are often the better choice, particularly in times of rising interest rates. The positive economic climate and the improved business outlook for many companies tend to lead to a decreasing spread – the difference between the yields on corporate and government bonds.
The underlying index contains 40 euro bonds of issuers located in the Eurozone, Switzerland, the UK, Sweden, Norway and Denmark, whose main fields of activity are not in the financial sector. Only senior bonds with a fixed coupon qualify. To additionally limit risk, further measures were enacted. Per issuer a maximum of two bonds is included and the weighting per issuer is limited to 7.5 percent. Only issuers with a rating of at least BBB- are taken into consideration. Generally, the issue of the bond may not be older than three years. The remaining time to maturity is between 1.5 and 10 years.
The ETF fully replicates the index, meaning that the UCITS III directive-conforming investment fund is comprised of the original securities. Currently, 73 percent of the bonds in the fund have a rating of A or better. The countries with the strongest weighting in the fund are the Netherlands (34%), France (23%) and the UK (11%). The current index composition mainly focuses on utilities (28%), telecommunications (17%) and oil & gas (11%). The average remaining time to maturity is slightly above five years with a yield of 3.7 percent. With a total expense ratio (TER) of 0.20 percent, the new fund is one of the lowest-priced ones among corporate bond ETFs worldwide.
The new fund in detail:
ETFlab iBoxx € Liquid Non-Financials Diversified | |
Investment target | The primary target of the ETFlab iBoxx € Liquid Non-Financials Diversified is to track the Markit iBoxx € Liquid Non-Financials Diversified index (price index) as exactly as possible. The ETFlab iBoxx € Liquid Non-Financials Diversified provides the share holder with an easy and efficient access to corporate bonds of issuers located in the Eurozone, Switzerland, the UK, Sweden, Norway and Denmark, whose main fields of activity are not in the financial sector. |
Investment policy | Index replication with the original bonds (full replication) |
Launch date / Listing | 03/03/2011 / 22/03/2011 |
WKN | ETF L38 |
ISIN | DE 000 ETF L38 3 |
Tracking ratio | approx. 1/1 of the index level |
Fund currency | EUR |
Trading currency | EUR |
Costs | all-in fee 0.20 % p.a. |
Business year | 01/03 – 28/02 |
Use of yields | Distribution (up to 4 times a year) |
Designated sponsor | DekaBank, Deutsche Girozentrale |
Source: ETFWorld – ETFLab
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