It was only a matter of time before another ETF company decided to take on Guggenheim’s innovative “BulletShares” franchise of target-date maturity fixed-income bond funds. So, IndexUniverse.com’s Olly Ludwig caught up with Bill Belden, Guggenheim’s head of product development, to discuss iShares’ plans to launch its own target-date maturity fund lineup. The takeaway? Guggenheim is prepared to do whatever it takes to defend its BulletShares, including competing on price.
IU.com: Let’s start on a newsy note. iShares nipping at your heels in terms of putting its own version of your BulletShares target-date maturity corporate bond funds into registration. It’s hard not to notice that iShares noticed. So, what does the target-date bond space look like now? And with an entrant like iShares, it changes the perspective a little bit, no?
Belden: Sure. I would say first that imitation is the sincerest form of flattery, and I think we’ve been generating enough traction with our BulletShares product offering that competition can only be expected. And we certainly welcome competition. It makes us all better. And investor choice is always something that we welcome as well. But having said that, we’re going to make sure our value proposition is clearly defined and communicated to the marketplace, because we do believe that the BulletShares ETFs have offered value in the nearly three years we’ve been in the marketplace. They will continue to offer value in the volatile market environment in which we’re currently living, and certainly as we face more interest rate volatility, in particular, going forward.
IU.com: With rates perhaps starting to move upward, does the whole “laddering” suddenly look inviting?
Belden: The defined-maturity aspect of the BulletShares ETF is what’s really appealing in a volatile interest rate market. And while interest rates have been steadily low, it’s anyone’s guess as it relates to the pace by which they go higher, and when it actually starts happening. But it’s good to know that, if you're invested in a product like that, that has that defined maturity, that your interest rate sensitivity is really managed.
IU.com: Three of those BulletShares securities have successfully matured and closed—two investment grade, one junk bond as of the end of last year, right? And I'm wondering if you might shed some light on what sort of feedback followed those moments. Those are crucial thresholds to get through without any major hiccups—for investors and for your company as well, right?
Belden: Right. Despite all of the information we provide and the education we have provided, seeing is believing. Actually seeing the products perform in the way we say they're going to perform are critical proof points for advisors and investors to say, “OK, we hear exactly what you're doing conceptually. We love what you're doing. But we want to see something actually mature before we can certainly jump onboard.”
And so I think that what we have seen over the course of the past two Januarys is that we’ve matured those products you just alluded to. And we’ve seen the process go very smoothly. We’ve seen all the investors and the funds get their NAVs back as of Dec. 31, 2012, as those maturities have rolled off. And more importantly, we've seen, in each of those successive Januarys, that money came back into the BulletShares suite, in many cases.