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LSE welcomes bond and ‘put options’ ETFs

Two US firms have made separate exchange-traded fund (ETF) listings on the London Stock Exchange, including Vanguard with a product that adds to development in the fixed income ETF market.

Vanguard has launched a US dollar-denominated corporate bond ETF claiming a first for the European bond ETF market which has been criticised for a lack of innovation.

The other ETF is from WisdomTree which has listed a fund linked to S&P 500 volatility that uses put options.

Vanguard’s product, which is also listed on Deutsche Börse, is called the Vanguard USD Corporate 1-3 Year Bond Ucits ETF and gives access to global short-dated investment grade corporate debt. The firm said it is the only short-term corporate bond ETF offering a 1-3 year benchmark.

The ETF tracks the Bloomberg Barclays Global Aggregate Corporate: USD Index 1-3 Year.

WisdomTree, which last week also announced the launch of a fixed income ETF investing in “CoCo” bonds – has now listed the WisdomTree Cboe S&P 500 PutWrite Ucits ETF.

The fund tracks Cboe S&P 500 PutWrite Index and invests in one and three-month Treasury bills, while selling or “writing” S&P 500 put options.

According to WisdomTree, the index consistently displayed a much smaller drawdown during market downturns; providing  98% of the return of the S&P 500, but only 66% of the volatility from June 30, 1986, through year-end 2017.

WisdomTree said the ETF offered a “unique source of return by delivering an institutional options strategy in a widely accessible Ucits ETF wrapper”.

Christopher Gannatti, WisdomTree head of research in Europe, said: “With the S&P 500 at or near record highs and investors having enjoyed a strong run of performance, we believe that it could be time to position for greater future volatility and downside risk.”

Vanguard has $5 trillion (€4.26 trillion) and WisdomTree has approximately $64.1 billion in assets under management.

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