swap based corporate bond etf from db xtrackers

Db x-trackers has launched an ETF that gives exposure to an index of liquid sterling-denominated corporate bonds.

swap based corporate bond etf from db xtrackers


The db x-trackers II iBoxx GBP Liquid Corporate 100 Index ETF provides exposure to up to 100 sterling-denominated corporate bonds that have been screened for liquidity.

An eligible bond will be one that has at least two years to run until maturity and a minimum outstanding of £400m.

The design favours a corporate bond index weighted in favour of liquidity rather than cap size or level of debt, with db x-trackers claiming replication of the index performance can therefore be achieved more efficiently and with greater certainty than using an index that possibly holds illiquid underlying components.

The firm uses a swap-based replication method rather than physically owning securities.

Manooj Mistry, head of db X-trackers for the UK, commented “We’ve developed our sterling corporate bond ETF to provide investors with the exact returns of the index minus the fixed total expense ratio.”

He added that with traditional corporate bond ETFs the investor has to accept tracking difference risk which can be substantial because of the potentially illiquid nature of the underlying.

The TER for this Ucits IV-compliant product is 0.2%.