ProShares, a premier provider of alternative exchange traded funds (ETFs), has launched ProShares Investment Grade–Interest Rate Hedged (bats:IGHG), the first investment grade bond ETF in the United States 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.
Michael Sapir, chairman and CEO of ProShare Advisors, said: "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. We are pleased to offer the first U.S. 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.
Jayni Kosoff, managing director of Citi Fixed Income Indices, said: "Citi is pleased to be partnering with ProShares in the development of a series of indices for their suite of alternative ETFs. 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."