Daily ETF Watch: Active Floater Nears

June 27, 2014

AdvisorShares updated regulatory paperwork on its active floating-rate ETF, called the AdvisorShares Pacific Asset Enhanced Floating Rate ETF (FLRT) to include fees, in a move to give investors another tool to manage the risks to bond holdings created by the prospect of rising interest rates.

Floating-rate bond ETFs have become popular in the past few years and continue to resonate with investors in 2014 as they prepare for the day when the Federal Reserve begins pushing official short-term interest rates higher.

For example, the iShares Floating Rate Bond ETF (FLOT | B-99) raked in more than $3.15 billion in net new assets in 2013, growing to become a $3.7 billion fund.

Floaters are generally designed to offer protection against price volatility caused by changes in interest rates. Unlike fixed-rate debt securities, prices on floating-rate securities are less sensitive to fluctuations in interest rates because the coupons of the bond adjust regularly, partially offsetting the impact of changes in interest rates. They are, as flows indicate, popular in a rising-rate environment.

AdvisorShares is hoping that its proposed FLRT ETF can be as successful as FLOT. The fund, subadvised by Pacific Asset Management, will invest in a portfolio of income-producing floating-rate loans and floating-rate debt securities, according to the regulatory filing.

It has a proposed expense ratio of 1.10 percent, or $110 for every $10,000 invested.

Launches

The Nasdaq OMX Group and ETRE Financial, a New York-based real estate financial services firm, has formed a new partnership in the real estate investment trust benchmark index space, with the launch of 12 co-branded indexes.

Both firms are touting the new indexes as a way for investors to gain smart-beta exposure to the U.S. real estate market through the usage of REIT security types. The indexes weight components based on the total value of the underlying properties of the REIT, rather than simply the traditional market-cap equity value of the component.

 

 

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