Moreover, the fund could enhance returns through “carry trade” where borrowed securities are sold and the short seller profits by using the proceeds to buy a security with a higher interest rate.
The current environment favors high-yield debt because slow economic growth has historically supported high-yield bonds, healthy corporate credit environment and loan defaults are at historical lows, First Trust said.
Investors may see more similar offerings in the weeks ahead. The ProShares High Yield Interest Rate Hedged ETF is waiting on regulatory approval and the launch of the Market Vectors U.S. Treasury-Hedged High Yield Bond Index ETF (THHY) has been recently delayed, reports Brendan Conway for Barron’s.
For more information on new fund products, visit our new ETFs category.
Max Chen contributed to this article.