RYE BROOK, N.Y., Feb. 15, 2017 /PRNewswire/ -- IndexIQ, a leading provider of innovative investment solutions, today announced the launch of the IQ S&P High Yield Low Volatility Bond ETF (NYSE Arca: HYLV), the next generation of factor-based fixed income ETFs. HYLV is subadvised by MacKay Shields, a $95 billion fixed income boutique wholly owned by New York Life Investment Management (NYLIM).
HYLV is designed to track the S&P U.S. High Yield Low Volatility Corporate Bond Index (the Index), which follows a rules-based, transparent approach to high yield bond investing. The Index is designed to capture the performance of U.S. high yield corporate bonds with the potential for lower relative volatility and greater liquidity.
The Index works by identifying high yield bonds that are deemed to have less credit risk, as determined by a formula that combines a bond's spread and duration into a measure called "Marginal Contribution to Risk" (MCR). Bonds with a higher MCR are deemed to have higher credit risk and are excluded from the investment universe. Research from NYLIM, IndexIQ's parent company, and Standard and Poor's has found that this methodology typically lowered the volatility of returns and exposure to defaults.
HYLV is the latest entry into the factor-based fixed income space by IndexIQ and NYLIM. The fund joins the IQ Enhanced Core Bond U.S. ETF (NYSE Arca: AGGE) and IQ Enhanced Core Plus Bond U.S. ETF (NYSE Arca: AGGP), which were launched in May of 2016. AGGE and AGGP were the first ETFs to bring momentum-based investing to the fixed income ETFs and collectively have approximately $330 million in assets.
Senior Managing Director and Chief Investment Officer, New York Life Investment Management, Jae Yoon, commented:
"HYLV is the outcome of a collaboration between IndexIQ; the Strategic Asset Allocation and Solutions division of New York Life Investment Management; MacKay Shields, a leader in fixed income investing; and Standard and Poor's, one of the world's most respected index providers. Together we're giving investors and advisors tools that will help them add income generation potential to their portfolios in what is still a historically low rate environment, while addressing the concerns about volatility that often accompany high yield exposures."
Chief Executive Officer at IndexIQ Adam Patti commented:
"With HYLV, as with AGGE and AGGP, we are bringing a new class of solutions to market -- products that allow investors to boost the income generated by their bond portfolios while reducing risk and volatility. The launch of this fund is the latest step in our long term strategy, to engage our network of independent investment boutiques to build innovative solutions with investors' and advisors' investment goals in mind. We're excited to bring HYLV to market, providing access to the combined expertise and breadth of our New York Life Investment Management's world class offerings."
IndexIQ is a pioneer and leading provider of innovative investment solutions focused on absolute return, real assets, international and fixed income strategies. IndexIQ's solutions are offered as ETFs, mutual funds, separately managed accounts, and ETF model portfolios. The company's philosophy is to democratize investment management by providing all investors with cost-effective access to the types of high-quality, sophisticated investment products that typically have been reserved for institutional and ultra high-net-worth investors. IndexIQ's mission is to take indexing to the next level by combining the best attributes of both passive and active investing, and make strategies available to investors in low cost, liquid, and transparent products**. IndexIQ is an indirect, wholly-owned subsidiary of New York Life Insurance Company. Additional information about IndexIQ and its products can be found at IQetfs.com.
As with all investments, there are certain risks of investing in the Fund. The Fund's Shares will change in value and you could lose money by investing in the Fund. There is no assurance that the investment objectives can be met.
High yield securities generally offer a higher current yield than the yield available from higher grade issues, but typically involve greater risk. Securities rated below investment grade are commonly referred to as "junk bonds."
Funds that invest in bonds are subject to interest rate risk and can lose principal value when interest rates rise. Interest rates in the United States are near historic lows, which may increase the Fund's exposure to risks associated with rising interest rates. Bonds are also subject to credit risk, which is the possibility that the bond issuer may fail to pay interest and principal in a timely manner.
The Underlying Index seeks to provide exposure to U.S. dollar-denominated high yield corporate bonds that are measured to have less credit risk based on their Marginal Contribution to Risk. As with any measure of a bond's credit risk, Marginal Contribution to Risk may fail to accurately reflect the credit risk of an individual bond. In addition, Marginal Contribution to Risk is not predictive of the price performance of fixed income securities. In addition, there is no guarantee that the construction methodology of the Underlying Index will accurately provide exposure to U.S. dollar denominated high yield corporate bonds with lower credit risk.
To the extent that the Underlying Index is concentrated in a particular industry, the Fund also will be concentrated in that industry. Concentrated Fund investments will subject the Fund to a greater risk of loss as a result of adverse economic, business or other developments than if its investments were diversified across different industry sectors.
Investments in foreign securities may be riskier than investments in U.S. securities. Differences, including less stringent investor protections and disclosure standards, less liquid trading markets and political and economic developments in foreign countries, may affect the value of the Fund's investments in foreign securities.
As a new fund, there can be no assurance that it will grow to or maintain an economically viable size, in which case it may experience greater tracking error to its Underlying Index than it otherwise would at higher asset levels or it could ultimately liquidate.
The Merrill Lynch US High Yield Master II Index is a commonly used benchmark index for high-yield corporate bonds. The Master II is a measure of the broad high yield market.
The "S&P U.S. High Yield Low Volatility Corporate Bond Index" is a product of S&P Dow Jones Indices LLC or its affiliates ("SPDJI"), and has been licensed for use by IndexIQ Advisors LLC. Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by IndexIQ Advisors LLC. IQ S&P High Yield Low Volatility Bond ETF is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P U.S. High Yield Low Volatility Corporate Bond Index.
Consider the Fund's investment objectives, risks, and charges and expenses carefully before investing. The prospectus and the statement of additional information include this and other relevant information about the Fund and are available by visiting IQetfs.com or calling 888-934-0777. Read the prospectus carefully before investing.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units", and otherwise, can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in-kind.