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MIG and MBBB utilize Moody’s Analytics credit risk data to look beyond traditional fixed income risk measures in selecting investment grade and BBB-rated bonds with the most attractive valuations
VanEck today announced the launch of two new corporate bond exchange-traded funds (ETFs) designed to provide investors with important new tools to enhance their investment grade bond exposures. The VanEck Vectors® Moody’s Analytics® IG Corporate Bond ETF (MIG) and the VanEck Vectors® Moody’s Analytics® BBB Corporate Bond ETF (MBBB) both began trading today on the CBOE BZX Exchange, and join VanEck’s highly diversified family of income-focused ETF offerings.
Bonds are selected for the underlying indices by applying a Moody’s Analytics quantitative credit risk model, which provides investors with forward looking credit risk metrics, including a bond’s EDF™ (Expected Default Frequency) from which a fair value spread can be determined. The index methodology uses the model to identify bonds that offer attractive spreads relative to their embedded credit risk, and also uses the model to help identify bonds that are at a high risk of being downgraded to non-investment grade.
"The corporate bond universe is expansive and there can be a great deal of dispersion in terms of where the market is pricing risk and a bond’s fair value. Finding bonds with attractive valuations and achieving outperformance is built upon accurately evaluating a bond’s expected credit risk going forward. Incorporating market implied information into the selection process to evaluate credit risk allows you to do that, particularly in volatile markets," said Fran Rodilosso, Head of Fixed Income ETF Portfolio Management at VanEck.
Moody’s Analytics, a subsidiary of Moody’s Corporation, is a leading provider of award-winning quantitative credit risk analysis tools. Moody’s Analytics CreditEdge® platform, which provides key inputs for the funds’ underlying indices, combines the industry’s leading probability of default model with cutting edge credit analytics to deliver a tool that can identify relative value and provide early warnings of credit deterioration.
"We have established a comprehensive set of metrics for early warning detection of credit defaults and downgrades," said Nihil Patel, Managing Director at Moody’s Analytics. "Our research shows our credit risk metrics can help identify undervalued securities. We are thrilled to be able to offer our credit risk metrics for use in the indices underlying VanEck’s funds."
MIG, which has an expense ratio of 20 bps, seeks to track the MVIS Moody’s Analytics US Investment Grade Corporate Bond Index (US IG Index). MBBB, which has an expense ratio of 25 bps, seeks to track the MVIS Moody’s Analytics US BBB Corporate Bond Index (BBB Index). Both indexes are rules-based and are the first U.S. investment grade bond indexes to be driven by Moody’s Analytics credit risk modeling. The indices rebalance monthly.
"Moody’s Analytics is the recognized industry leader in credit risk modeling so we are excited to be using their credit risk models and data to power these two new funds," added William Sokol, Senior ETF Product Manager at VanEck. "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."
MIG and MBBB join a VanEck corporate bond ETF lineup that also includes the VanEck Vectors® Fallen Angel High Yield Bond ETF (ANGL®), which targets "fallen angel" high yield bonds and is ranked #1 out of 392 funds within the Morningstar High Yield Bond Category since inception1, and the VanEck Vectors® Investment Grade Floating Rate ETF (FLTR®), which focuses on U.S. dollar denominated floating rate notes issues by corporate issuers and rated investment grade and has a unique methodology that seeks to enhance yield potential without increasing interest rate risk.
VanEck has a history of looking beyond the financial markets to identify trends that are likely to create impactful investment opportunities. We were one of the first U.S. asset managers to offer investors access to international markets. This set the tone for the firm’s drive to identify asset classes and trends – including gold investing in 1968, emerging markets in 1993, and exchange traded funds in 2006 – that subsequently shaped the investment management industry.
Today, VanEck offers active and passive strategies with compelling exposures supported by well-designed investment processes. As of October 31, 2020, VanEck managed approximately $60.2 billion in assets, including mutual funds, ETFs and institutional accounts. The firm’s capabilities range from core investment opportunities to more specialized exposures to enhance portfolio diversification. Our actively managed strategies are fueled by in-depth, bottom-up research and security selection from portfolio managers with direct experience in the sectors and regions in which they invest. Investability, liquidity, diversity, and transparency are key to the experienced decision-making around market and index selection underlying VanEck’s passive strategies.
Since our founding in 1955, putting our clients’ interests first, in all market environments, has been at the heart of the firm’s mission.
About Moody’s Analytics
Moody’s Analytics provides financial intelligence and analytical tools to help business leaders make better, faster decisions. Our deep risk expertise, expansive information resources, and innovative application of technology help our clients confidently navigate an evolving marketplace. We are known for our industry-leading and award-winning solutions, made up of research, data, software, and professional services, assembled to deliver a seamless customer experience. We create confidence in thousands of organizations worldwide, with our commitment to excellence, open mindset approach, and focus on meeting customer needs. For more information about Moody’s Analytics, visit our website or connect with us on Twitter or LinkedIn.
Moody's Analytics, Inc. is a subsidiary of Moody's Corporation (NYSE: MCO). Moody’s Corporation reported revenue of $4.8 billion in 2019, employs approximately 11,400 people worldwide and maintains a presence in more than 40 countries.
1 Source: ©2020 Morningstar, Inc. All Rights Reserved. Data as of 9/30/2020. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
An investment in of the VanEck Vectors Moody’s Analytics IG Corporate Bond ETF or VanEck Vectors Moody’s Analytics BBB Corporate Bond ETF (the "Funds") may be subject to risks which include, among others, investing in European issuers, foreign securities, BBB-rated bond, credit, interest rate, liquidity, restricted securities, consumer staples sector, financials sector, energy sector, communications sector, market, operational, high portfolio turnover, call, sampling, index tracking, authorized participant concentration, absence of prior active market, trading issues, passive management, non-diversified, and trading, premium/discount and liquidity of fund shares risks. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.
An investment in VanEck Vectors Fallen Angel High Yield Bond ETF may be subject to risk which includes, among others, high yield securities, foreign securities, foreign currency, credit, interest rate, restricted securities, market, operational, call, sampling, basic materials, energy, financial services, telecommunications, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares and concentration risks, all of which may adversely affect the Fund.
An investment in VanEck Vectors Investment Grade Floating Rate ETF may be subject to risk which includes, among others, foreign securities, foreign currency, credit, interest rate, restricted securities, financial services, market, operational, sampling, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified and concentration risks, all of which may adversely affect the Fund.
Moody’s Analytics is a registered trademark of Moody’s Analytics, Inc. and/or its affiliates and is used under license.
The Funds are not sponsored, promoted, sold or supported in any manner by Moody’s Analytics nor does Moody’s Analytics offer any express or implicit guarantee or assurance either with regard to the results of using the US IG Index and BBB Index (together, the "Indices") and/or the Moody’s Analytics trademark or data at any time or in any other respect. Certain quantitative financial data used in calculating and publishing the Indices is licensed to the Funds manager by Moody’s Analytics. Moody’s Analytics has no obligation to point out errors in the data to third parties including but not limited to investors and/or financial intermediaries of the Funds. The licensing of data or the Moody’s Analytics trademark for the purpose of use in connection with the Indices and Funds does not constitutes a recommendation by Moody’s Analytics to invest capital in the Funds nor does it in any way represent an assurance or opinion of Moody’s Analytics with regard to any investment in this financial instrument.
MVIS does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that is offered by third parties and that seeks to provide and investment return based on the performance of any index. MVIS makes no assurance that investment products based on the index will accurately track index performance or provide positive investment returns. MVIS is not an investment advisor, and it makes no representation regarding the advisability of investing in any such investment fund or other investment vehicle. A decision to invest in any such investment fund or other investment vehicle should not be made in reliance on any of the statements set forth in this document. MVIS is the index business of VanEck, a U.S. based investment management firm and provider of VanEck Vectors® ETFs.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus , which contains this and other information, call 800.826.2333 or visit vaneck.com/etfs . Please read the prospectus and summary prospectus carefully before investing.
1 Source: Moody’s Analytics based on various industry awards including Risk Technology Awards 2020 Winner (Best credit data provider, Best wholesale credit modelling software), Risk Technology Awards 2019 Winner (Best credit data provider, Best wholesale credit modelling software), and Data Management Awards 2018 Winner (Best risk data aggregation platform)
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Chris Sullivan/Julia Stoll