Investors are growing uneasy about how and when the rally in high-yield bonds will end. So Deutsche Bank is trying to cover as many possibilities as it can.
The asset management arm of the German lender is starting three new ETFs focused on different parts of the junk bond universe, according to Arne Noack, the firm’s head of exchange-traded product development for the U.S. They’re designed to help investors dial up or down their exposure to speculative-grade debt and complement Deutsche Asset Management’s existing high-yield bond funds, he said.
“For us it’s the provision of a very comprehensive tool set in an asset class — high-yield bonds — that is very relevant to investors,” Noack said. “The well roundedness of the tool set will attract more interest to the individual components than if the component was just by itself.”
One ETF will buy higher yielding, less credit-worthy debt, another will invest in the securities of better quality companies that pay less, and a third will offer exposure to short-term junk securities, he said.
The funds will also have a feature that’s worked for Deutsche before: low fees. The firm made waves at the end of 2016 when it started the Xtrackers USD High Yield Corporate Bond ETF (HYLB) at just 25 basis points — half the price of the largest junk bond ETF: BlackRock’s iShares iBoxx $ High Yield Corporate Bond ETF (HYG). Deutsche’s HYLB now has more than $550 million of assets and has lowered its fee to 20 basis points.
That’s what the Xtrackers Short Duration High Yield Corporate Bond ETF will charge. The Xtrackers High Beta High Yield Bond ETF (HYUP) will cost 35 basis points, while the Xtrackers Low Beta High Yield Bond ETF (HYDW) will charge 25 basis points.
“Having a low price tag always helps,” Noack said. “I’ve yet to encounter the investor who complains about having too cheap a price.”