[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.
Investors have fewer—but better—choices.
Sometimes what’s behind a very high dividend yield is truly surprising.
For VIX-related ETFs to work as that ‘magical’ hedge, you have to time the market. Good luck with that.
But this new product is different than other euro-hedged funds.