Climbing the ‘Ladder’: Defined-Maturity Bond ETFs to Manage Rate Risks
November 14th 2012 at 8:35am by John Spence
ETF Trends Editor Tom Lydon speaks with Bill Belden, Head of Product Development at Guggenheim Investments, about the firm’s lineup of BulletShares exchange traded funds.
The ETFs invest in corporate debt and are geared to provide the diversification of mutual funds and the benefits of individual bonds, including the return of principal at maturity. [ETF of the Week: Defined-Maturity Bonds]
“What it delivers to investors and their advisors is the ability to capture the best of investing in a bond fund with a defined-maturity aspect that aligns with owning an individual bond,” Belden says.
The BulletShares suite features nine ETFs that invest in investment-grade corporate debt, and seven funds tracking high-yield bonds. [Defined-Maturity Bond ETFs Have Room to Grow]
The ETFs are designed to mature in specific years. At the end of that year, the proceeds are delivered back to shareholders at net asset value, similar to how an individual bond matures.
Belden explains how BulletShares ETF investors always know the fund’s yield, holdings and duration because of the specific maturity.
He tells Lydon one of the funds’ biggest uses is creating “laddered” bond portfolios to manage the risk of rising interest rates. [Corporate Bond ETFs Target Specific Maturities]
At the end of October, the BulletShares ETFs held about $1.8 billion in assets under management.
Watch the video to see the full interview.
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