ProShares Plans Hedged High-Yield Debt ETF

By
November 27, 2012
Share:

Hedged junk bond ETFs appear to be a trend as a ProShares filing makes it the third such fund to go into the product pipeline in about a month.

ProShares, the world’s biggest purveyor of leveraged and inverse exchange-traded funds, filed regulatory paperwork to market a high-yield corporate debt fund that will be hedged by taking short positions in U.S. Treasurys, making it the latest addition to what appears to be a new trend in fixed-income ETFs.

Indeed, the proposed ProShares High Yield-Interest Rate Hedged ETF is the third junk bond ETF that will short Treasurys to offset exposure to go into registration this autumn. The filings amount to a sign fund sponsors want to address anxiety that already-paltry bond yields could morph into a disastrous rout if bond investors have to ride out a selloff as interest rates head higher going forward.

“By taking such short positions, the Index is designed to mitigate any losses the high yield bonds would otherwise experience in a generally rising Treasury interest rate environment (and conversely, will limit any gains the high yield bonds would experience in a falling Treasury interest rate environment),” Bethesda, Md.-based ProShares said in the registration statement that it filed Nov. 26.

As IndexUniverse ETF Analyst Gene Koyfman wrote in a recent blog, fund sponsors are preparing for higher interest rates and bond yields—pinned to super-low levels since the market crash of 2008. In that vein, a recent selloff in the high-yield debt market was seen by some as a sign that concern about rising rates had moved to junk bonds, which have been a huge hit this year among yield-hungry investors.

The two other registrations for high-yield debt funds that plan to short Treasurys were filed by Wheaton, Ill.-based FirstTrust and New York-based Market Vectors, and Koyfman characterized the planned ETFs as vehicles with exposure to credit-driving returns that mitigate interest rate risk at the same time.

The company didn’t say what the ProShares High Yield-Interest Rate Hedged ETF would cost investors each year, nor did it say what its ticker symbol would be.

ProShares is the No. 6 U.S. ETF sponsor, with just over $22 billion in assets, according to IndexUniverse’s daily “ETF League Table.”

Total U.S.-listed ETF assets are meanwhile at around $1.292 trillion, according to data compiled by IndexUniverse.

 

ETF.COM CHANNELS

Interested in China? Use our China ETFs Channel, library, and ETF screener.

Interested in oil? Use our oil ETFs channel, library and ETF screener!

ETF DAILY DATA

The largest gold miners ETF lost assets on Thursday, April 28.

BlackRock's ETF assets gained $859 million on Thursday, April 28.

ETF.COM ANALYST BLOGS

By Drew Voros

With the broad equity ideas all taken, issuers look for thinner slices of exposure.

By David Lichtblau

How funds wash away capital gains through create/redeem process.

By Dave Nadig

End investors are the big winners; brokers—not so much.

By Dave Nadig

ETF industry petitions the SEC for market microstructure changes.

ETF INDUSTRY PERSPECTIVE

By Sprott Asset Management

New fund’s underlying index targets equities sentiment on social media.

By Kristi Kuechler

Avoid taking unrewarded—or unintended—risks.

By Vanguard

The investing giant outlines its expectations for the markets and global economy in 2016.