Xtrackers ESG USD High Yield Corporate Bond UCITS ETF 1C

Issuer: Xtrackers

Asset Class: Fixed Income

TER: 25bps

Trading Currency: GBP

Pays Income: False

Listing Date: 17 Nov 2022

Ticker: XZHS

ISIN: IE0006YM7D84

This actively managed high-yield bond strategy offers the potential for higher income and capital appreciation by investing in debt securities rated below investment grade. The active management allows the portfolio manager to navigate the complexities of the high-yield market, identifying undervalued securities and managing credit risk more dynamically than a passive index-tracking fund. This flexibility is crucial in a segment sensitive to economic cycles and issuer-specific events. The goal is to capture attractive yields while mitigating the inherent risks of lower-quality debt through careful security selection and ongoing portfolio adjustments.

The strategy enhances the traditional high-yield approach by integrating Environmental, Social, and Governance (ESG) criteria into its investment process. It actively seeks to invest in companies that demonstrate strong sustainability practices, while avoiding those with significant ESG-related risks or involvement in controversial activities. This dual-focus approach aims to provide not only competitive financial returns but also a positive societal and environmental impact. By selecting bonds from issuers with favorable ESG profiles, the fund seeks to build a more resilient portfolio, as companies with strong ESG credentials may be better positioned for long-term success and less susceptible to reputational or regulatory risks.

For investors looking for enhanced income potential beyond what is typically offered by government or investment-grade corporate bonds, this fund presents a compelling option. It combines the return-seeking nature of high-yield debt with the risk-mitigating and values-aligning principles of ESG investing. The active management provides an additional layer of professional oversight, aiming to optimize the risk-return trade-off in the dynamic corporate bond market. This makes it suitable for those willing to accept higher credit risk in exchange for higher potential yields and who wish to align their investments with sustainable principles.