The world’s first European high-yield bond exchange traded fund has been launched on the London Stock Exchange by iShares.

The iShares Markit iBoxx Euro High Yield ETF offers investors access to almost 100 of the most liquid sub-investment grade corporate bonds.

iShares says the fund provides investors with a liquid and diversified route into the European high-yield debt market.

Consumer goods, industrials and basic materials amount to around half of the index weighting, with no single holding making up more than 2 per cent.

Around two thirds of the bonds are BB-rated, with 5 per cent allocated to CCC-rated bonds.

Blanca Koenig (pictured), fixed income strategist at BlackRock, which owns iShares, comments: ‘Investor appetite for European high-yield exposure has developed in recent years, and iShares is pleased to offer clients exposure to a sector that has traditionally been hard to access.’

Owned and managed independently by global financial information company Markit, the ETF uses multiple pricing sources and is based on the average ratings allocated to each debt instrument by ratings agencies Fitch, Standard & Poor’s, and Moody’s.

The launch comes at a time of increased demand for bonds from private investors. In July, the global bond, corporate bond and strategic bond sectors were ranked first, second and fourth respectively out of all the Investment Management Association sectors. M&G is also gearing up to launch an inflation-linked corporate bond fund next week.

JPMorgan Asset Management says investors should look at high-yield bonds if they want better returns. Dan Morris, market strategist at JPMorgan, comments: ‘We would suggest high-yield bonds and high dividend equities, along with convertible bonds, to provide an opportunity to participate in any equity rally that occurs while protecting against the risk of another market correction.’

He adds that high-yield debt, in particular, is ‘offering attractive spreads in comparison to government bonds’.

In every issue of Money Observer magazine there are full listings for ETFs.