ProShares is coming up with yet another Exchange-traded funds (ETF). This time it is a high-yield corporate debt ETF. The new ETF will hedge by taking short positions in U.S. Treasury’s.
The High Yield-Interest Rate Hedged ETF from ProShares will be traded under the symbol ‘HYHG’ and will initially list on BATS exchange.
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In one of the recent filings concerning the new ETF, Bethesda, Md.-based ProShares said “By taking these short positions, the Index seeks to mitigate the potential negative impact of rising Treasury interest rates (“interest rates”) on the performance of high yield bonds (conversely limiting the potential positive impact of falling interest rates).”
To get an edge over rivals, ProShares is pricing the new ETF with a 50-basis-point fee waiver. ProShares is the largest purveyor of leveraged and inverse ETF’s globally.
Details of the other two funds
The ETF from ProShares is only the third entrant in the expanding field of yield-seeking junk bond funds with hedges. The other two are from Van Eck and First Trust. Among the three ETF, the latest one is the least expensive. The ProShares ETF will carry an annual expense ratio of 0.50 percent, or $50 for each $10,000 invested
The First Trust High Yield Long/Short ETF (NasdaqGM: HYLS), launched in February this year and holding just over $23 million in assets, has a total expense ratio of 1.19 percent annually. The break-up of the cost is 0.95 percent management fees, 0.23 percent leverage costs and 0.01 percent in acquired funds fees.
The Market Vectors Treasury-Hedged High Yield Bond ETF (NYSEArca: THHY) was launched in March and has $10.2 million in assets. It has an expense ratio of 1.45 percent annually after a fee waiver. This includes 45 basis points in management fees, 95 basis points in interest on securities sold short and cost to borrow, and 11 basis points in “other expenses.”
All the three high-yield corporate bond funds will design their own strategy to short Treasury’s in order to compensate for their positions in high-yield corporate debt.
Other recent offerings
Talking about junk bonds, recently a junk bond offering in India by Rolta India Limited (NSE:ROLTA) got many US takers. The offerings got good response across regions with 47 percent contributed by Asia and 43 percent by the U.S.
Earlier, Cambria Shareholder Yield ETF (NYSEARCA:SYLD) was introduced to the market on May 14. The fund invests in the equity of 100 publicly traded companies with a market cap of $200 million or more. The fund is unique in a way that it is neither a classic dividend fund, nor a classic income fund.