VanEck introduces two new corporate bond ETFs based on Moody’s Analytics credit model

December 03, 2020 04:45 PM AEDT | By Team Kalkine Media

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VanEck introduces two new corporate bond ETFs based on Moody’s Analytics credit model

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On 02 December 2020, VanEck launched two new corporate bond ETFs that are intended to provide investors with new essential tools to improve their investment-grade bond exposures. The two new corporate bond ETFs, VanEck Vectors^® Moody’s Analytics^® IG Corporate Bond ETF (MIG) and the VanEck Vectors^® Moody’s Analytics^® BBB Corporate Bond ETF (MBBB) started trading yesterday on CBOE BZX Exchange. Both these ETFs joined VanEck’s extremely diversified family of income-focused ETF offerings.

The bonds were selected for the underlying indices by using Moody’s Analytics quantitative credit risk model. This model offers investors with forward-looking credit risk metrics that comprise of a bond’s EDF™ (Expected Default Frequency) using which it is possible to find a fair value spread. The index methodology uses the model to find bonds that offer appealing spreads as compared to their embedded credit risk. The model also helps to identify bonds that are at a high risk of being lowered to non-investment grade.

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The corporate bond universe is vast, and there can be a great deal of dispersion regarding where the market is pricing risk plus the fair value of the bond.

Fran Rodilosso, Head of Fixed Income ETF Portfolio Management, VanEck stated:

Moody’s has set a complete set of metrics to detect any credit defaults and downgrades. As per the research conducted by Moody’s, the credit risk metrics can identify undervalued securities. These credit risk metrics can be used in indices underlying VanEck’s funds.

VanEck Vectors^® Moody’s Analytics^® IG Corporate Bond ETF has an expense ratio of 20 bps. It aims to follow the MVIS Moody’s Analytics US Investment Grade Corporate Bond Index (US IG Index). VanEck Vectors^® Moody’s Analytics^® BBB Corporate Bond ETF has an expense ratio of 25 bps and intends to track the MVIS Moody’s Analytics US BBB Corporate Bond Index (BBB Index).

These two indices follow the rules and the first US investment-grade bond indexes that would be driven by Moody’s Analytics credit risk modelling. There is also a monthly rebalance of these indices.

Also joining the VanEck corporate bond ETF line-up are MIG and MBBB. The line-up comprising VanEck Vectors^® Fallen Angel High Yield Bond ETF. This ETF targets “fallen angel” high yield bonds and has been positioned at the first place out of 392 funds within the Morningstar High Yield Bond Category since its launch.

INTERESTING READ: 3 ASX ETFs Worth Looking at Amid Current Economic Scenario

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