iShares $ High Yield Corp Bond UCITS ETF - EUR Hedged (Dist)

Issuer: iShares

Asset Class: Fixed Income

TER: 55bps

Trading Currency: EUR

Pays Income: False

Listing Date: 08 Mar 2018

Ticker: IHYE

ISIN: IE00BF3N7102

This fund offers targeted exposure to the U.S. high-yield corporate bond market, often referred to as 'junk bonds'. These are debt instruments issued by corporations with a lower credit rating than investment-grade bonds, and consequently, they offer higher potential yields to compensate investors for the increased credit risk. This type of investment can serve as a potent source of income within a diversified portfolio, particularly in an environment where traditional government and high-grade corporate bonds may offer limited returns. The fund aims to capture the performance of this specific market segment by tracking a broad benchmark of sub-investment grade corporate debt.

A key feature of this product is its currency-hedging mechanism. While the underlying bonds are denominated in U.S. dollars, the fund hedges its currency exposure back to its base currency. This is a critical aspect for investors outside the U.S., as it helps to neutralize the impact of exchange rate volatility on the investment's returns. The strategy allows investors to focus purely on the credit risk and interest rate dynamics of the U.S. high-yield market without the added complexity and risk of foreign exchange movements. The fund uses physical replication, meaning it holds the actual bonds that constitute its underlying index.

The investment is suitable for those who believe that the economic outlook is stable or improving, which tends to be favourable for high-yield bonds as default rates remain low. It provides a diversified way to access this asset class, spreading risk across numerous issuers and industries. This makes it a strategic tool for investors with a moderate to high risk tolerance seeking to enhance their portfolio's income generation while managing currency risk from a non-dollar perspective.