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Barclays Announces Changes To Its US High Yield Very Liquid Index

Barclays, a publisher of leading broad market bond benchmarks, today announced changes to its US High Yield Very Liquid Index (VLI), an index used for Exchange Traded Funds in both the United States and Canada, and for other institutional and research purposes. Barclays will implement all of these changes starting on February 1, 2013, and will transition from the existing rules to the new rules over the course of a six-month period.

While preserving the index’s core design philosophy of measuring the returns of a more liquid segment of the broad high yield corporate bond market, these rule changes are being made to reduce monthly turnover in index composition, increase issuer level diversification and reduce tracking error to broad market high yield indices.

Changes to the Barclays US High Yield VLI are as follows:

  • Increasing the number of eligible bonds from the largest bond per issuer to the three largest bonds per issuer;
  • Lowering the minimum security amount outstanding threshold from $600 million to $500 million;
  • Lengthening the seasoning period from issuance for eligible bonds from three to five years; and
  • Capping the exposure of any index eligible issuer at two percent (there is currently no issuer cap in place).

These changes to the Barclays US High Yield VLI enhance the usability and replicability of this benchmark, and reflect the growth and evolution of the high yield bond market as a whole. Applied to data from the past 10 years, the changes would have decreased turnover by over 30% and tracking error to the overall high yield market would have improved significantly.

The Barclays Indices platform has offered market-leading benchmarks and other index products since 1973 to meet the diverse needs of global investors. These products facilitate investment and market analysis of both alpha and beta sources, portfolio benchmarking and performance measurement, asset allocation, and the creation of index tracking funds and index-based structured products.

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