Schwab filed paperwork proposing three short-term, target-duration bond funds, the latest sign that fund sponsors are looking to provide investors with more choices to effectively manage an environment of rising interest rates.
- The Schwab TargetDuration 2-Month ETF
- The Schwab TargetDuration 9-Month ETF
- The Schwab TargetDuration 12-Month ETF
While the filing came just two days after the Fed’s decision to continue its monthly $85 billion bond-buying program, investors have begun in recent months to shift bond holdings to the short end of the yield curve to manage interest-rate risk before the Fed begins to normalize borrowing rates. The three Schwab funds fit the bill perfectly, allowing investors to eke out a bit of return without the heightened risk that bond investments further along the curve can subject them to.
All three funds will make use of similar investment and security-selection strategies, with the principal difference between the three being their respective target durations of two, nine and 12 months.
The securities within the funds’ portfolios will be investment-grade, dollar-denominated debt from U.S. as well as foreign issuers. The debts purchased by these funds will have a rating of or be equivalent to at least A- per Standard & Poor’s Financial Services.
None of the funds yet has a ticker or price, but the prospectus did say that the three funds would have their initial listings on the New York Stock Exchange’s electronic platform, Arca.
WBIG hedges in some areas and bets big in others.
Today the news is full of stories about the collapsing pound. Not so much.
Real-world tracking difference is incredibly important. So why does nobody look at it?
The latest SPIVA scorecard is pretty depressing news for active managers.