Today, Strategy Shares rolled out an ETF that provides exposure to a portfolio of investment-grade bonds with a twist. The Strategy Shares Gold-Hedged Bond ETF (GLDB) uses total return swaps to replicate the bond portion and exposure to gold futures to provide a return that is similar to if the holdings of the bond portfolio were denominated in gold instead of U.S. dollars, according to the fund’s portfolio manager, David Miller.
GLDB comes with an expense ratio of 0.79% and lists on Cboe Global Markets.
“With GLDB, we combine a gold overlay with bonds in one portfolio to give investors what we believe is an optimum way to generate income while maintaining purchasing power," said Miller, citing the effects of inflation since the end of the Bretton Woods system in 1973 and the increasing supply of money—up 1,200% since 2008—as reasons behind that loss of purchasing power.
While the fund tracks the Solactive Gold-Backed Bond Index, that benchmark comprises two other indexes. GLDB uses total return swaps to get exposure the Solactive USD Investment Grade Corporate Index, while the gold portion is represented by the Solactive Gold Front Month MD Rolling Futures Index ER. The fund relies on a Cayman Island subsidiary to hold its futures and swaps as well as cash and cash equivalents for purposes of collateral, according to the prospectus.
The document further notes that the portfolio will generally allocate 80-90% to its bond exposure and 10-20% to gold futures.
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