Pimco has partnered with exchange-traded fund (ETF) provider Source to launch a version of its successful high yield corporate bond ETF with a sterling-hedged share class.
The ETF will be listed in London and the hedged share class aims to remove US dollar currency exposure for sterling investors who access the US high yield bond market.
Called the Pimco Short-Term High Yield Corporate Bond Index Source Ucits ETF, it aims to generate a comparable yield to the broad US high yield index. An existing product without a sterling hedge has raised $1.2 billion (€1.1 billion).
The product is a "smart passive" solution and uses a risk factor-based approach to optimise the replication of the Bank of America Merrill Lynch US High Yield 0-5 Year index.
James Polisson, chief marketing officer of Source, says the share class meets the needs of investors in the UK who are interested in accessing the underlying US high-yield bond market, but who prefer to not have any currency exposure outside of sterling.
"Secondly, it meets the needs of income-seeking investors wanting not only higher yields but also more frequent distributions." Income distribution is monthly.
Mike Trovato, head of product management at Pimco Europe, says the ETF offers yield enhancement and also, by investing in bonds with shorter maturities, it offers protection should the Federal Reserve hike rates before the end of the year.
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