WisdomTree has launched its Rising Rates Exchange Traded Fund solutions suite on the Nasdaq Stock Market.
The ETFs combine fixed income strategies with targeted US Treasury exposures to achieve specific durations in order to help manage interest rate risk.
"With interest rates at historic lows, the values of traditional fixed income portfolios may be vulnerable to losses should rates increase in the future. The WisdomTree Rising Rates ETFs allow fixed income investors to maintain traditional allocations while providing greater flexibility to manage interest rate risk," says Rick Harper, WisdomTree's head of currency and fixed income.
WisdomTree has worked with fixed income index providers to develop interest rate driven solutions centred on their benchmark indexes.
The strategies are:
• WisdomTree Barclays US Aggregate Bond Zero Duration Fund (AGZD), 0.23 per cent expense ratio
• WisdomTree Barclays US Aggregate Bond Negative Duration Fund (AGND), 0.28 per cent expense ratio
BofA Merrill Lynch 0-5 Year US High Yield Constrained Index based strategies
• WisdomTree BofA Merrill Lynch High Yield Bond Zero Duration Fund (HYZD), 0.43 per cent expense ratio
• WisdomTree BofA Merrill Lynch High Yield Bond Negative Duration Fund (HYND), 0.48 per cent expense ratio
Additionally, WisdomTree has launched the WisdomTree Japan Interest Rate Strategy Fund (JGBB), a strategy designed to benefit if interest rates increase in Japan. JGBB seeks to provide long exposure to US Treasury Bills while at the same time providing exposures to Japanese Government Bonds (JGBs) that are intended to rise in value as Japanese interest rates rise. The fund also seeks to partially offset against fluctuations in the relative value of the Japanese yen against the US dollar. JGBB is listed on the Nasdaq Stock Market and has an expense ratio of 0.50 per cent.
"The Bank of Japan (BOJ) has overtly targeted a two per cent inflation target and unveiled an extensive quantitative and qualitative monetary easing programme designed to stimulate Japan's economy. The BOJ's bond buying may be able to compress these JGB rates in the short term, but according to BOJ Governor Kuroda, interest rates should eventually rise if the BOJ accomplishes its goal. JGBB expands WisdomTree's 'Abenomics' toolkit; it is designed to benefit from a weakening yen and rising interest rate environment in Japan," Harper says.