Exchange traded fund provider UBS has added to its range of currency-hedged fixed income ETFs with the launch of a new product that will help investors better manage their exposure to currency changes when investing in foreign bonds.
The Barclays US Liquid Corporates UCITS ETF is listed in GBP-hedged and un-hedged USD versions and offers exposure to investment grade corporate bonds that are issued by companies based in the U.S.
Listed on the London Stock Exchange the ETF physically replicates the Barclays US Liquid Corporates index. The sterling hedged ETF allows investors in the UK to protect from unwanted currency fluctuations in the US dollar against sterling. The un-hedged ETF option is for investors who want exposure to U.S. corporate bonds without protection against currency risk. This is available in both US dollar and sterling.
Andrew Walsh, UK head of ETF sales at UBS, said: "When investing in foreign bonds, it is worth looking at mitigating the foreign currency risk where possible. Currency fluctuations can have a disproportionate impact on the investment returns received – particularly when it comes to fixed income. For example, when buying foreign corporate bonds, it's possible that the foreign currency in which you are invested may decline to such an extent that it completely negates the returns the investor received from the bond's price return and coupon.
“The launch of this UBS Barclays Liquid Corporates GBP-hedged ETF means that investors can gain access to the broad U.S. Corporate bond market without worrying about the USD declining against GBP while they are invested."
According to UBS it is the largest European provider of currency-hedged ETFs. The UBS-ETF Barclays US Liquid Corporates UCITS ETF (GBP hedged) has a total expense ratio of 0.23%, and the UBS-ETF Barclays US Liquid Corporates UCITS ETF (USD) has a TER of 0.18%.