DWS has launched a suite of target-maturity fixed income ETFs in Europe built around euro-denominated corporate bonds.
Target-maturity ETFs invest solely in bonds expiring in a specific year.
Unlike conventional fixed income ETFs, which trade in and out of bonds to maintain a broadly static duration exposure, target-maturity ETFs acquire a portfolio of bonds with maturity dates in line with the target year and hold them until maturity, at which point the ETF liquidates.
Target-maturity bond ETFs provide a toolkit for investors to more accurately manage their duration exposure. As opposed to individual bonds, the funds also benefit from diversification, thereby mitigating potential idiosyncratic risks such as credit rating downgrades or defaults.
Additionally, by combining funds of varying target maturity dates, investors can tailor portfolios to meet specific future cash requirements.
Listed on Deutsche Börse Xetra, DWS’s new suite consists of four ETFs targeting the maturity years of 2027, 2029, 2031, and 2033.
The suite of funds, each of which comes with a management fee of 0.12%, is outlined below:
Xtrackers II Target Maturity Sept 2027 EUR Corporate Bond UCITS ETF (XB27 GY)
Xtrackers II Target Maturity Sept 2029 EUR Corporate Bond UCITS ETF (XB29 GY)
Xtrackers II Target Maturity Sept 2031 EUR Corporate Bond UCITS ETF (XB31 GY)
Xtrackers II Target Maturity Sept 2033 EUR Corporate Bond UCITS ETF (XB33 GY)
The funds are linked to target-maturity versions of the Bloomberg MSCI Euro Corporate SRI Index which consists of fixed-rate, euro-denominated, investment-grade corporate bonds with a minimum €300m par amount outstanding.
The index excludes violators of UN Global Compact principles, companies embroiled in severe ESG-related controversies, and firms with business activities linked to weapons, alcohol, tobacco, gambling, adult entertainment, genetically modified organisms, and nuclear power.
Due to the index’s ESG screening, each ETF is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
DWS is the second issuer in Europe to introduce a suite of target-maturity bond ETFs following BlackRock’s launch of four ‘iBonds’ ETFs in August. The funds provide exposure to US dollar- or euro-denominated corporate bonds that mature in 2026 or 2028. Each iBonds ETF also comes with an expense ratio of 0.12%.