Invesco has launched an ETF comprised of euro corporate bond hybrids, the first in Europe.
The Invesco Euro Corporate Hybrid Bond UCITS ETF (EHYB) is listed on the London Stock Exchange with an ongoing charge of 0.39%.
EHYB tracks the Bloomberg Barclays Euro Universal Corporate ex Financials Hybrid Capital Securities 8% Capped Bond index and is comprised of euro-denominated, fixed rate hybrid securities issued by non-financial corporates or government-related agencies.
EHYB implements constraints in its bid to improve tradability and credit quality such as constituents must have a minimum of €500 million outstanding in debt, maturities of at least 1.5 years from issue and a minimum credit rating of BB+.
Furthermore, individual securities are capped at 8% of the overall index value.
Hybrid securities offer investors an alternative for traditional high yield while interest rates are low and minimal yields from conventional government and corporate bond segments.
Gary Buxton (pictured), head of EMEA ETF at Invesco, commented: “This ETF is the latest addition to our alternative income strategies, a group that includes AT1 capital bonds and preferred shares.
“They exhibit low correlation with other asset classes, so could offer important diversification benefits.”
Paul Syms, head of EMEA fixed income ETF product management at Invesco, added: “Market flows suggest there is certainly appetite for this type of product, with our Invesco AT1 Capital Bond UCITS ETF growing to more than $750 million in AUM since launch.
“Euro Hybrids are similar in many ways to AT1s but are issued by non-financial companies, providing further opportunity for investors to diversify their portfolio exposures.”