Lyxor has cross-listed its sustainability-screened US dollar high-yield corporate bond ETF on Deutsche Börse Xetra.
The fund provides exposure to US dollar-denominated high-yield corporate bonds from issuers with better-than-average ESG profiles.
The Lyxor USD High Yield UCITS ETF is available to trade in euro (LYX8 GY) and euro-hedged (LYXE GY) share classes. Income is distributed.
The fund uses synthetic (swap-based) replication to track the Bloomberg Barclays MSCI US Corporate High Yield SRI Sustainable Index, an index jointly developed by Bloomberg and MSCI.
The index combines Bloomberg’s expertise in fixed income indexing with MSCI’s expertise in environmental, social, and governance (ESG) analysis.
Construction is based upon the parent Bloomberg Barclays US Corporate High Yield Index universe which covers US dollar-denominated high-yield bonds from developed market corporate issuers operating in the industrial, financial, and utility sectors.
Fixed-rate, zero-coupon, and option-embedded bonds are all eligible for inclusion as long as they have a minimum of $500 million outstanding and a remaining time to maturity greater than one year.
The index first screens out issuers embroiled in severe ESG-related controversies as well as those with substantial revenue derived from adult entertainment, alcohol, gambling, tobacco, controversial and military weapons, civilian firearms, nuclear power, and genetically modified organisms.
The remaining issuers are each then assigned an ESG rating from MSCI based on a seven-point scale from ‘AAA’ to ‘CCC’, according to how the issuer manages key ESG risks relative to industry peers. A minimum rating of BBB is required to be included in the index.
Constituents are weighted by market value outstanding, and the index is rebalanced on a monthly basis.
The ETF first launched in July 2016 and has since grown to over $140m in assets. It already maintains listings on London Stock Exchange, in US dollars (USHY LN) and pound sterling (UHYG LN), and in euros on Euronext Paris (USHY FP) and Borsa Italiana (USHY IM). An additional euro-hedged share class is available on Borsa Italiana (USHY IM).
The ETF’s unhedged share classes come with an expense ratio of 0.25%, while the currency-hedged versions come in at 0.30%.