Most Innovative New Income ETFs

January 13, 2014

1. WisdomTree Barclays U.S. Aggregate Bond Negative Duration Fund (AGND)

AGND is the first negative-duration bond portfolio offered in a nonleveraged or inverse ETF wrapper.

The fund takes investor concerns about exposure to duration to a new level.

What’s interesting is that it serves up exposure to the broad Barclays Aggregate index—one of the most popular bond benchmarks in the market—while shorting a basket of Treasurys. That short position is enough to bring the effective duration of the portfolio to negative territory.

AGND’s current effective duration is roughly negative-five years.

Unlike other WisdomTree ETFs, this one does not track an in-house index; it tracks the performance of the Barclays Rate Hedged U.S. Aggregate Bond Index, Negative Five Duration. This allows myriad investors who are already allocated to the Barclays Aggregate to remain on familiar turf. The advantage is that with AGND, they now enjoy an added tool that allows them to manage duration.

If you were to simply invest in a fund like the iShares Core Total U.S. Bond Market (AGG | A-98)—an ETF that has more than $14 billion in assets—you’d own a portfolio currently showing a duration of 5.2 years. The farther in the curve, the more sensitive the portfolio is to interest-rate risk.

AGND has an annual expense ratio of 0.28 percent, or $28 for each $10,000 invested. The fund has been in the market less than a month.

(Editor’s note: There is not enough market performance history yet for a chart.)

Charts courtesy of StockCharts.com

 

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