WisdomTree unveils suite of ETFs designed to manage rising interest rates

Jan 2nd, 2014 | By | Category: Fixed Income

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WisdomTree, a major provider of exchange-traded funds, has unveiled a new suite of fixed income ETFs listed on the Nasdaq stock market designed to help investors to manage interest rate risk.

WisdomTree unveils suite of ETFs designed to manage rising interest rates

WisdomTree has unveiled a suite of ETFs designed to help investors to position their portfolios for rising interest rates.

Called the “Rising Rates ETF Solution Suite”, the ETFs combine widely followed fixed income strategies with targeted US Treasury exposures to achieve specific durations in order to help manage interest rate risk.

Rick Harper, WisdomTree’s Head of Currency and Fixed Income, said: “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.”

WisdomTree has worked with leading fixed income index providers Barclays and BofA Merrill Lynch to develop interest rate driven solutions centred on their benchmark indices.

Barclays US Aggregate Index-based strategies:

WisdomTree Barclays US Aggregate Bond Zero Duration ETF (AGZD)
0.23% expense ratio

WisdomTree Barclays US Aggregate Bond Negative Duration ETF (AGND)
0.28% expense ratio

BofA Merrill Lynch 0-5 Year US High Yield Constrained Index-based strategies:

WisdomTree BofA Merrill Lynch High Yield Bond Zero Duration ETF (HYZD)
0.43% expense ratio

WisdomTree BofA Merrill Lynch High Yield Bond Negative Duration ETF (HYND)
0.48% expense ratio

The ETF sponsor has also launched the WisdomTree Japan Interest Rate Strategy ETF (JGBB), a strategy designed to benefit if interest rates increase in Japan.

Linked to the in-house WisdomTree Japan Interest Rate Strategy Index, the fund 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.

It has an expense ratio of 0.50% and is listed on the Nasdaq stock market.

Harper added: “The Bank of Japan (BOJ) has overtly targeted a 2% inflation target and unveiled an extensive quantitative and qualitative monetary easing program 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.”

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