[Editor's Note: A previous version of this story listed the First Trust High Yield Long/Short Fund (NYSEArca: HYLS) as a competitor to HYHG. This was an inaccurate comparison and we apologize for the confusion.]
ProShares filed regulatory paperwork that would bring an interest-rate-hedged bond fund to market, pairing an investment-grade bond ETF with the ProShares High Yield-Interest Rate Hedged ETF (NYSEArca: HYHG), a hedged high-yield fund that targets corporate junk bonds.
The ProShares Investment Grade—Interest Rate Hedged fund will take a dive into highly liquid investment-grade bonds, tracking an as-yet-unnamed “Investment Grade (Treasury Rate-Hedged) Index.” It will take long positions in U.S.-dollar-denominated investment-grade corporate bonds and short positions in U.S. Treasury notes or bonds.
The Bethesda, Md.-based issuer, known particularly for its leveraged and inverse strategies, launched the junk-focused spin on this idea, HYHG, in late spring. HYHG, which has $27.4 million in assets, costs 50 basis points a year, or $50 for each $10,000 invested.
The marketing of these hedged bond-fund strategies amounts to a sign fund sponsors are eager to address anxiety that already-paltry bond yields could morph into a disastrous rout if bond investors have to ride out a sell-off as the economy recovers and interest rates head higher. Yields on benchmark 10-year Treasury yields have moved decidedly higher in recent months and are now nearing 3 percent.
The fund doesn’t yet have a ticker or price, and it’s also not yet clear which exchange the fund will use for its initial listing.
This week, the NYSE expects to hear from the SEC. What will it mean for ETF investors?
Our annual fixed-income conference is coming up in a little more than a week and I can’t wait.
When it comes to reinvesting dividends, mutual funds have ETFs beat.
With VIX spiking, it’s tempting to pile in or bet against it. Both are a bad idea.