db X-trackers has launched an ETF aimed at providing investors with exposure to liquid sterling denominated investment-grade bonds.

The new fund tracks the Markit iBoxx GBP Liquid Corporate 100 index, which comprises up to 100 sterling corporate bonds weighted in favour of liquidity. To qualify for inclusion, bonds must have at least £400 million outstanding, and there must be at least two years until maturity.

Of the bonds currently included in the index, about 75 percent have a rating of at least ‘A’, with the remainder rated ‘BBB’. UK bonds make up the largest component, with 46.71 percent, followed by the Netherlands at 14.55 percent and the United States at 13.50 percent.

The fund is synthetically replicated, with parent bank Deutsche Bank acting as the swap counterparty. Manooj Mistry, head of db X-trackers for the UK, said that the use of a swap-based methodology would mean the issuer was able to deliver the exact returns of the index.

“We’ve developed our sterling corporate bond ETF to provide investors with the exact returns of the index minus the fixed total expense ratio. This is a big advantage on traditional corporate bond ETFs, where the investor has to accept tracking difference risk, which can be substantial because of the potentially illiquid nature of the underlying,” said Mistry.

The db X-trackers iBoxx GBP Liquid Corporate 100 Index ETF has been listed on the London Stock Exchange and has an all-in fee of 0.20 percent.

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