VanEck Debuts Bond ETFs With Twist

December 02, 2020

Today, VanEck Global launched its first ETFs in more than a year. The VanEck Vectors Moody’s Analytics IG Corporate Bond ETF (MIG) and VanEck Vectors Moody’s Analytics BBB Corporate Bond ETF (MBBB) both rely on indexes powered by Moody’s Analytics research.

While MIG comes with an expense ratio of 0.20%, MBBB charges 0.25%. Both funds list on Cboe Global Markets, the parent company of ETF.com.

The indexes are constructed using the Moody’s Analytics data, with MIG targeting the broad investment grade corporate bond market and MBBB drilling down to target just the BBB segment of the same space. The methodologies are designed to use forward-looking credit risk metrics to select bonds that are attractive prospects based on their spreads relative to their credit risk, while avoiding bonds that have a reasonable expectation of being downgraded to less than investment grade. The model also incorporates an expected default frequency metric, according to a press release.

The model underlying the indexes has been in use for decades and the funds are the first bond ETFs to implement it.

“We believe that these funds can offer investors the income potential and outperformance they are looking for without having to assume excessive risk, which is particularly important in this prolonged low yield environment,” said VanEck Senior ETF Product Manager Wiliam Sokol.

“It's selecting the most attractively valued bonds from within the entire US corporate bond market, to build a very diversified portfolio, but one that only focuses on the most attractively valued securities, the one that avoids bonds where you're not earning enough compensation for the risk you're taking,” he noted.

As of mid-November, MIG’s underlying index included 364 securities from 126 different issuers, while MBBB’s underlying index included 283 bonds from 94 different issuers, according to the  prospectus.

Contact Heather Bell at [email protected]

 

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