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ProShares, a leading US-based provider of alternative exchange-traded funds, has announced that the ProShares High Yield-Interest Rate Hedged ETF (HYHG) has garnered more than $100 million in assets since its launch in May 2013.
The fund, which is listed on the BATS Exchange, provides diversified exposure to a liquid portfolio of high-yield bonds while seeking to mitigate the impact of interest rate movements.
Commenting on the milestone, Michael Sapir, Chairman and CEO of ProShare Advisors, said: “Many investors have been attracted to the income of high-yield bonds but are concerned about rising rates. We believe investors have embraced HYHG because it goes beyond other ways to mitigate the effect of rising rates, like short-term bond funds.”
In contrast to short-term bond funds, which simply have low durations, the ProShares fund specifically targets a duration of zero. Duration is a measure of price sensitivity to interest rate changes – the lower the duration, the less sensitive to rate changes.
The fund is linked to the Citi High Yield (Treasury Rate-Hedged) Index. To be included in the index, bonds must have a minimum issue size of $1 billion, be issued within the past five years and have at least one year remaining to maturity. No more than two issues from an issuer are allowed, and no more than 2% of the index is allocated to a single issuer.
The interest rate hedge included in the index is composed of short positions in Treasury securities. The hedge is designed to have sensitivity to interest rate changes approximately equivalent to the long high-yield portion of the index. The index does not attempt to mitigate other factors influencing the price of high yield bonds, such as credit risk, which may have a greater impact on high-yield bond prices than changes in interest rates.
The fund has an expense ratio of 0.50%.