The Federal Reserve has opted to delay tapering its bond purchases but that hasn’t stopped ETF providers from continuing to roll out products designed to mitigate the negative effects of rising interest rates.
“When interest rates rise, bonds and bond funds tend to lose value, a fact that has caused investors to pull out of many traditional bond funds this year,” reports Ashley Lau for Reuters.
To attract and maintain investors, ETF providers have promoted offerings “that focus on bonds but rely on protective strategies like interest rate hedging and defined-maturity portfolios,” according to the article. [Guggenheim Lists More Target-Date BulletShares ETFs]
For example, short-term bond ETFs have pulled in nearly $32 billion of inflows so far in 2013. In particular, PIMCO Enhanced Short Maturity ETF (NYSEArca: MINT) has been popular as an alternative to money market funds. [PIMCO MINTs a Winner]