ProShares Plans Hedged High-Yield Debt ETF

By
Olly Ludwig
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 DAILY DATA

International equity funds like 'HEDJ' and 'EFAV' added assets on Thursday, Jan. 29, as total U.S.-listed ETF assets rose above $2 trillion.

'SPY,' 'XLF,' 'XLI' and 'BIL' paced SSgA's issuer-leading outflows on Thursday Jan. 29, as total U.S.-listed ETF assets rose above $2 trillion.

ETF.COM ANALYST BLOGS

By Dave Nadig

The world’s biggest ETF conference made a number of important things amply clear.

By Dave Nadig

Sometimes it’s what’s under the hood that matters. Sometimes it’s not.

By Dave Nadig

President Obama may be undermining the benefits of tax-loss harvesting.

By Scott Burley

Wouldn’t it be nice to know if your favorite ETF were part of a securities-lending program?