Xtrackers ESG EUR High Yield Corporate Bond UCITS 1C ETF
| Issuer: Xtrackers |
| Asset Class: Fixed Income |
| TER: 25bps |
| Trading Currency: EUR |
| Pays Income: False |
| Listing Date: 11 Jul 2022 |
| Ticker: XZHE |
| ISIN: IE0006GNB732 |
This fund offers investors a strategic way to access the European high-yield corporate bond market while adhering to environmental, social, and governance (ESG) principles. The primary objective is to reflect the performance of an index composed of euro-denominated, sub-investment-grade corporate bonds that meet specific sustainability criteria. By focusing on this segment, the investment provides the potential for higher income compared to investment-grade debt, catering to those with a greater appetite for risk. The strategy is designed for investors who want to combine the return potential of high-yield bonds with a commitment to responsible investing, targeting companies with stronger ESG profiles.
The underlying index employs a rules-based methodology that begins by applying a series of ESG-related exclusions. This process screens out companies involved in controversial business activities such as weapons, tobacco, and thermal coal. After the exclusions, the remaining bonds are re-weighted based on the issuer's ESG rating, giving more prominence to companies that demonstrate superior sustainability practices. This dual approach of negative screening and positive tilting aims to construct a portfolio that not only avoids laggards but also rewards leaders in corporate responsibility, potentially mitigating certain long-term risks associated with poor governance or negative environmental impact.
This instrument can be a valuable addition to a diversified portfolio, serving as a satellite holding to enhance overall yield or as a core component for fixed-income investors with a strong ESG focus. It is particularly suitable for those with a medium to long-term investment horizon. As an accumulating share class, any interest income generated by the underlying bonds is automatically reinvested, which facilitates compounding and supports long-term capital growth. This structure is efficient for investors who prefer to let their returns grow within the fund rather than receive regular income distributions.
The underlying index employs a rules-based methodology that begins by applying a series of ESG-related exclusions. This process screens out companies involved in controversial business activities such as weapons, tobacco, and thermal coal. After the exclusions, the remaining bonds are re-weighted based on the issuer's ESG rating, giving more prominence to companies that demonstrate superior sustainability practices. This dual approach of negative screening and positive tilting aims to construct a portfolio that not only avoids laggards but also rewards leaders in corporate responsibility, potentially mitigating certain long-term risks associated with poor governance or negative environmental impact.
This instrument can be a valuable addition to a diversified portfolio, serving as a satellite holding to enhance overall yield or as a core component for fixed-income investors with a strong ESG focus. It is particularly suitable for those with a medium to long-term investment horizon. As an accumulating share class, any interest income generated by the underlying bonds is automatically reinvested, which facilitates compounding and supports long-term capital growth. This structure is efficient for investors who prefer to let their returns grow within the fund rather than receive regular income distributions.
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