Shares Magazine - August 22, 2019

EXCHANGE-TRADED FUNDS

22 August 2019 | SHARES | 

ĮdžĞĚŝŶĐŽŵĞǁŽƵůĚ͕ĂŶĚďĞ
prepared that it is more likely to
ĨĂůůŝŶůŝŶĞǁŝƚŚĞƋƵŝƟĞƐ͛͘

LOWER CREDIT RATING
Of course having a lower credit
ƌĂƟŶŐŵĞĂŶƐŚŝŐŚLJŝĞůĚƐďŽŶĚƐ
ĚŽŚĂǀĞŵŽƌĞƌŝƐŬ͕ĂŶĚŝŶƟŵĞƐ
when there’s an economic
ĚŽǁŶƚƵƌŶ͕ƚŚĞŶƵŵďĞƌŽĨĮƌŵƐ

that default on their debt could

spike as lower earnings mean

they could run out of cash to

pay bondholders.

ĞĨĂƵůƟŶŐŝƐĂůǁĂLJƐĂůĂƐƚ

resort for companies, because

once they do that, their

ĐŚĂŶĐĞƐŽĨŐĞƫŶŐƉĞŽƉůĞ

lend them money in future is

ƉƌĂĐƟĐĂůůLJnjŝůĐŚ͘

And the income element of

such bonds, via the coupon

paid to investors, means despite

ŐĞƫŶŐƐŽůĚŽīǁŝƚŚƐŚĂƌĞƐǁŚĞŶ

ŵĂƌŬĞƚƐŐŽĚŽǁŶ͕ƚŚĞLJǁŝůůƐƟůů

ƚĞŶĚƚŽďĞůĞƐƐǀŽůĂƟůĞ͘

For those looking to add high

LJŝĞůĚƚŽƚŚĞŝƌƉŽƌƞŽůŝŽ͕ŚĞƌĞĂƌĞĂ

ĐŽƵƉůĞŽĨƉŽƐƐŝďůĞŽƉƟŽŶƐ͘

TOP HIGH YIELD BOND ETFS

BMO Barclays Global High

Yield Bond ETF (GBPH)

On AJ Bell’s Favourite funds list,

this ETF seeks to replicate the

performance of the Bloomberg

Barclays Global High Yield Bond

Corporate Very Liquid ex-144A

,ĞĚŐĞĚƚŽ'W/ŶĚĞdž͕ǁŚŝĐŚŝƐĂ

broad-based measure of global

high yield corporate bonds and,

ĂƐŝƚƐĂLJƐŽŶƚŚĞƟŶ͕ŝƐǀĞƌLJůŝƋƵŝĚ͘

Holding bonds from the likes

ŽĨEĞƞůŝdž͕ĂƌĐůĂLJƐĂŶĚdͲDŽďŝůĞ͕

the ETF is comprised of 500

bonds in total across a wide

range of industries.

The ETF is also hedged back

to sterling, which ensures its

ƉĞƌĨŽƌŵĂŶĐĞŝƐŶŽƚĂīĞĐƚĞĚďLJ

ĂŶLJĐƵƌƌĞŶĐLJŇƵĐƚƵĂƟŽŶƐ͘

/ƚŚĂƐƌĞƚƵƌŶĞĚϯ͘ϳρйĂLJĞĂƌ

over the past three years, has an

ĂƩƌĂĐƟǀĞĚŝǀŝĚĞŶĚLJŝĞůĚŽĨκ͘ϳΘй

ĂŶĚĂƌĞůĂƟǀĞůLJůŽǁĐŽƐƚŽĨϬ͘ϯρй

per annum.

iShares Fallen Angels

High Yield Corporate

Bond ETF (WIGG)

This ETF invests in so-called

‘fallen angels’, bonds that were

once considered investment

ŐƌĂĚĞ͕ŝ͘Ğ͘ƌĞůĂƟǀĞůLJƐĂĨĞ͕ďƵƚ

have since fallen to ‘junk’ status

due to a decline in the issuer’s

ĐƌĞĚŝƚƌĂƟŶŐ͘

/ƚĨŽůůŽǁƐƚŚĞĂƌĐůĂLJƐ'ůŽďĂů

Corporate ex EM Fallen Angels

ϯй/ƐƐƵĞƌĂƉƉĞĚ/ŶĚĞdž͕ǁŚŝĐŚ

includes bonds from companies

that were once rated investment

grade but have since fallen into

the high yield category.

The index has an added

layer of security though in that

it excludes companies from

emerging markets, only tracking

the bonds issued by companies

in developed countries.

While more expensive than

the BMO ETF with a total

cost of 0.55% a year, it has

returned 10.29% so far in 2019

and also has a good 12-month

LJŝĞůĚŽĨκ͘ϳϮй͘

By Yoosof Farah

Reporter

WITH THE FTSE

100 LOSING MORE

THAN 6% OF ITS

VALUE SINCE THE

BEGINNING OF

AUGUST THERE IS

PLENTY OF REASON

FOR PEOPLE TO

BE SEEKING SAFE

HAVENS

W

S