Rising Interest Rates & Bond ETFs

Fixed-income strategies have been bleeding assets as interest rates rise faster than expected. Meanwhile, AdvisorShares is working on an actively managed “rising rate” exchange traded fund to help investors manage risk.

According to a Securities and Exchange Commission filing, the AdvisorShares Treesdale Rising Rate ETF (NYSEArca: HDGB) will try to generate current income while providing protection in a rising rate environment by holding positions in mortgage-related products with interest-only cash flows and manage duration risk with liquid interest rate products.

Treesdale Partners LLC is the sub-advisor to the actively managed ETF.

Eric Dutram for Zacks notes that this type of fund strategy could provide a fresh option if rates continue to increase.

The fund will be “investing principally in agency interest-only mortgage-backed securities, interest-only swaps and certain other mortgage-related derivative instruments, while maintaining a negative portfolio duration with a generally positive current yield by investing in U.S. Treasury obligations and other liquid rate instruments,” according to the filing.