The vast corporate bond market is rife with data that is conducive to analytics. VanEck was quick to recognize the opportunity and collaborate with ratings company Moody’s to create the VanEck Vectors Moody’s Analytics IG Corporate Bond ETF (MIG).
MIG seeks to track, as closely as possible, before fees and expenses, the price and yield performance of the MVIS® Moody’s Analytics® US Investment Grade Corporate Bond Index, which includes investment grade corporate bonds that have attractive valuations and a lower probability of being downgraded to high yield compared to other investment grade bonds.
Overall, MIG gives investors:
- A portfolio of investment grade bonds with attractive valuations relative to their “Expected Default Frequency”
- Quantitative approach supported by Moody’s Analytics’ extensive dataset and a team of 30 researchers
- Process driven by the same platform that powers credit risk management at over 650 of the world’s largest institutional investors
As mentioned, there are vast opportunities for ETFs in the corporate bond market and industry indexes like the S&P/ASX Corporate Bond Index has been on the steady rise since the Federal Reserve stepped in to backstop the corporate bond markets back in April.
“The corporate bond universe is expansive and there can be a great deal of dispersion in terms of where the market is pricing risk and a bond’s fair value. Finding bonds with attractive valuations and achieving outperformance is built upon accurately evaluating a bond’s expected credit risk going forward. Incorporating market implied information into the selection process to evaluate credit risk allows you to do that, particularly in volatile markets,” said Fran Rodilosso, Head of Fixed Income ETF Portfolio Management at VanEck, in a press release.
VanEck Collaborating With An Industry Leader
Per the press release, “Moody’s Analytics, a subsidiary of Moody’s Corporation, is a leading provider of award-winning quantitative credit risk analysis tools. Moody’s Analytics CreditEdge® platform, which provides key inputs for the funds’ underlying indices, combines the industry’s leading probability of default model with cutting edge credit analytics to deliver a tool that can identify relative value and provide early warnings of credit deterioration.”
“We have established a comprehensive set of metrics for early warning detection of credit defaults and downgrades,” said Nihil Patel, Managing Director at Moody’s Analytics. “Our research shows our credit risk metrics can help identify undervalued securities. We are thrilled to be able to offer our credit risk metrics for use in the indices underlying VanEck’s funds.”
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