ProShares has launched ProShares Investment Grade – Interest Rate Hedged, the first investment grade bond exchange-traded fund in the US that provides a built-in hedge against rising interest rates.
The new ETF targets a duration (a measure of interest rate sensitivity) of zero by shorting Treasury futures.
“Investors have been fleeing long-term bond funds as concerns grow over losses that might result from rising interest rates. While many investors have moved to shorter duration bond funds to lessen the impact of rising rates, they remain exposed to some interest rate risk,” says Michael Sapir (pictured), chairman and chief executive of ProShare Advisors. “We are pleased to offer the first US ETF to provide investors a portfolio of investment grade bonds with a built-in interest rate hedge designed to target a duration of zero.”
ProShares now offers two interest rate hedged bond ETFs. ProShares High Yield – Interest Rate Hedged (HYHG), launched earlier this year, targets a duration of zero on a diversified portfolio of high yield bonds. Each ETF tracks an index from Citi Fixed Income Indices.
“Citi is pleased to be partnering with ProShares in the development of a series of indices for their suite of alternative ETFs,” says Jayni Kosoff, managing director of Citi Fixed Income Indices. “We designed objective, transparent, rules-based indices that not only reflect ProShares’ insightful investment strategies, but also, importantly, investor sentiment. Investors benefit when index innovation brings these elements together.”