Invesco PowerShares has launched a new global high-yield exchange traded fund focused on bonds with shorter maturities. The fund joins a growing list of ETFs designed for bond investors who want international diversification, yield and some protection from rising interest rates.
According to a press release, the PowerShares Global Short Term High Yield Bond Portfolio (NYSEArca: PGHY) began trading Thursday, June 20. The bond ETF provides exposure to short-term U.S. dollar-denominated, high-yield debt, including sovereign, quasi-government and corporate bond securities, issued globally. PGHY has a 0.35% expense ratio and is expected to distribute yields monthly. [New High-Yield ETF to Track Global Short-Maturity Bonds]
The ETF has 31 holdings and the top components include ALROSA Finance 8.9%, Home Credit & Finance Bank 7.0%, AES Corp 7.8%, Vimpel Communications VIA VIP Financiace Ireland 6.5% and Metinvest BV 10.3%.
Credit quality allocations include BBB 3%, BB 48%, B 24%, CCC 3% and C 21%.
“The PowerShares global Short Term High Yield Bond Portfolio (PGHY) provides a convenient way for investors to gain exposure to a portfolio of high-yield bonds from issuers around the globe, while taking on a relatively low level of interest rate risk,” Lorraine Wang, Invesco PowerShares senior vice president of new product development, said in the press release.
PGHY has an effective duration of 1.73 years. The duration is a measure of a bond’s sensitivity to changes in interest rates – bond funds with lower durations would be less sensitive than higher duration bond ETFs.
“Bonds with shorter maturities generally carry less duration risk than bonds with longer maturities and can help investors protect fixed-income portfolios against rising interest rates,” Joseph Becker, senior fixed-income product strategist at Invesco PowerShares, said in the press release “While high-yield bonds generally carry higher credit risk, they also offer investors higher rates of income. We believe today’s exceptionally low interest rates, particularly at the short end of the yield curve, position short-term, high-yield bonds as an attractive investment for income seeking investors.”
The new fund could be competing with iShares Global High Yield Corporate Bond (NYSEArca: GHYG) and other ETFs that invest in international speculative-grade debt. [A Global Approach to High-Yield Bond ETFs]
For more information on new product launches, visit our new ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.