PowerShares Files For 3-Year Bond Fund

By
March 06, 2013
Share:

Invesco PowerShares filed regulatory paperwork to bring to market a short-term global bond fund serving up access to a relatively safe corner of the ETF market that offers protection from potentially large losses that holders of longer-dated bonds would face in the event of a bond-market meltdown.

The PowerShares Global Select Short Term Bond Portfolio will be based on the DB Global Dynamic Short Maturity Bond Index, which selects both public and private dollar-denominated bonds that are investment grade—having “a grade of BBB- or higher from Fitch and S&P or of Baa3 or higher from Moody’s,” according to the prospectus. The holding also must be no more than three years from maturity.

PowerShares’ fund comes at a possibly critical juncture, as bond investors start to look for ways to protect themselves from what a rise in inflation could do to prices of existing bonds. Concentrating holdings on the short end of the yield curve looks to be one of simplest ways of achieving this objective, even if short-term fixed-income holdings would entirely escape the effects of a bond market sell-off.

The proposed ETF will find itself in the middle of the pack in terms of maturity relative to a number of other popular funds on the market, such as the nearly $10 billion iShares Barclays 1-3 Year Credit Bond Fund (NYSEArca: CSJ) or the more than $10 billion Vanguard Short Term Bond ETF (NYSEArca: BSV).

Notably, it will have longer maturity than cash-equivalent funds on the market, such as the FlexShares Ready Access Variable Income ETF (NYSEArca: RAVI), which goes out to two years on the curve; and the Pimco Enhanced Short Maturity Strategy Fund (NYSEArca: MINT), which goes out one year. RAVI now has $7.5 million in assets, while MINT has $2.59 billion, according to data compiled by IndexUniverse.

The fund, which doesn’t yet have a price tag or a ticker, will have its primary listing on Arca, the New York Stock Exchange’s electronic trading platform.

 

ETF.COM CHANNELS

Want to learn more about smart-beta ETFs? Check out our smart-beta guide, essentials library and ETF screener!

ETF DAILY DATA

'DXJ,' the blockbuster currency-hedged Japan fund, led inflows on Friday, May 29, as total U.S.-listed ETF assets fell to $2.163 trillion.

'SPY,' 'XLF' and 'XLV' paced SSgA's issuer-leading inflows on Thursday, May 28, as total U.S.-listed ETF assets rose to $2.165 trillion.

ETF.COM ANALYST BLOGS

By Olly Ludwig

The ETF world is a hotbed of interesting new ideas, as this week’s launches make clear.

By Olly Ludwig

Yields will one day head higher, so is it time to get bond exposure outside the U.S.?

By Rachael Revesz

Stop dancing around the subject, call women ‘women’ and let’s be a more visible part of this industry.

By Olly Ludwig

It’s no secret that hedge funds love ETFs, but what’s less appreciated is that their love of ETFs will likely spell their demise.

ETF INDUSTRY PERSPECTIVE

By Dorsey Wright & Associates LLC

So many sectors, how do you choose? A quick guide from Dorsey Wright.

By Nasdaq Global Indexes

Bond exposure or bond performance? Only defined maturity indexes provide the latter.

By Invesco PowerShares

Invesco PowerShares and Market Strategies International’s second annual survey provides vital insights about smart beta and ETFs overall.