Daily ETF Watch: New Variable-Rate Fund

April 15, 2014

PowerShares is seemingly nearing the launch of its variable-rate ETF.

PowerShares has updated regulatory paperwork for its proposed PowerShares Variable Rate Preferred Portfolio (VRP), adding associated fees and tickers to the ETF, signaling that its launch may be just around the corner.

The proposed fund will track the Wells Fargo Hybrid and Preferred Securities Floating and Variable Rate Index, a market-capitalization-weighted benchmark that has exposure to preferred stocks and hybrid securities that pay a floating- or variable-rate dividend or coupon, according to the regulatory filing.

Variable- or floating-rate securities pay interest at rates that adjust whenever a specified benchmark interest rate (i.e., the Libor or a T-bill rate) changes, float at a fixed margin above a generally recognized base lending rate, or are reset or redetermined on specified dates (such as the last day of a month or calendar quarter).

The proposed fund will come at a time when investors are bracing for rising interest rates as the Federal Reserve continues tapering its bond-buying program. The Fed has signaled that rates may rise earlier than expected in 2015.

VRP’s annual expense ratio is 0.50 percent, or $50 for every $10,000 invested.


Starting June 30, the iShares 10+ Year Credit Bond ETF (CLY | C-78) will change its underlying index from the BofA Merrill Lynch 10+ Year US Corporate & Yankees Index to the Barclays U.S. Long Credit Index, according to a regulatory filing.

The Barclays U.S. Long Credit Index is a broad index measures the performance of U.S. long-term, investment-grade U.S. corporate bonds and U.S.-dollar-denominated bonds, including those of non-U.S. corporations and governments, with remaining maturities greater than 10 years.

Similarly, the BofA Merrill Lynch 10+ Year US Corporate & Yankees Index measures the performance of U.S.-dollar-denominated long-term, investment-grade U.S. corporate and Yankee bonds, which are issued in the U.S. bond markets by a foreign entity, but are denominated in U.S. dollars.


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