Xtrackers by DWS has launched an ETF providing dynamic risk-controlled exposure to U.S. dollar high-yield corporate bonds. The Xtrackers Risk Managed USD High Yield Strategy ETF (NYSE Arca: HYRM) tracks the Adaptive Wealth Strategies Risk Managed High Yield Index, which uses a daily algorithm to dynamically adjust exposure between bonds and cash equivalent investments.
HYRM is designed to track the performance of the U.S. dollar-denominated high-yield corporate bond market during normal market conditions, and the performance of a U.S. dollar cash position (accruing interest at the Effective Federal Funds Rate) during periods of adverse market conditions.
The underlying index uses a rules-based allocation mechanism to allocate between either 100% exposure to the Solactive USD High Yield Corporates Total Market Index or 100% exposure to the Solactive Fed Funds Effective Rate Total Return Index, based on quantitative market risk signals derived from measurements of price changes in the market.
“HYRM may be an interesting way for investors to gain exposure to the USD high yield bond market with a built-in risk-management process,” said Michael Curtis, head of U.S. passive product, in the press release announcing the fund’s launch. “Downside, or drawdown risks, are a key factor when allocating to high yield bonds, which the allocation mechanism of HYRM’s underlying index seeks to address effectively.”
The ETF has an expense ratio of 0.30% and is designed to utilize investments in other Xtrackers ETFs in order to gain exposure to U.S. high-yield bonds, in particular the Xtrackers USD High Yield Corporate Bond ETF (NYSE Arca: HYLB).
DWS offers a suite of six high-yield bond ETFs with approximately $7.5 billion in assets under management that use rules-based methodologies to provide exposure to different levels of credit and interest rate risk.
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