5 Tools To Manage Interest Rate Risk

December 16, 2015

2. The Safe-Haven Seeker

Investors who want to make an adjustment to their exposure because they have a particularly strong conviction that rates will rise might want to reduce interest-rate risk.

“The most common solution here is to move into shorter-maturity, fixed-income vehicles that offer less interest-rate risk, and are less impacted by rising rates,” Tucker said.

Within the ETF market, asset flows have been recently going into higher-grade short-maturity funds such as the iShares Short Maturity Bond ETF (NEAR | A), which has duration of around one year. A fund like the PIMCO Enhanced Short Maturity Strategy (MINT | B) is another one benefiting from interest-rate jitters.

Since Aug. 1 alone, NEAR and MINT have gathered more than $682 million and $142 million, respectively. NEAR has been particularly popular, attracting $1.4 billion so far in 2015. That reposition is a response to concerns about higher rates.

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