According to a separate press release, WisdomTree also launched two aggregate bond and two high-yield bond ETFs for investors interested in interest rate driven solutions.
The WisdomTree Barclays U.S. Aggregate Bond Zero Duration Fund (NYSEArca: AGZD) will include exposure to Barclays U.S. Aggregate Bond Index while trying to manage interest rate risk through short positions in U.S. Treasuries. AGZD has a 0.23% expense ratio.
The WisdomTree Barclays U.S. Aggregate Bond Negative Duration Fund (NYSEArca: AGND) also includes exposure to the Barclays U.S. Aggregate Bond Index and manages rate risk through shorting U.S. Treasuries, but the fund tries to achieve a negative duration. AGND has a 0.28% expense ratio.
While both utilize long/short positioning to achieve their target strategies, the “Zero Duration” ETF’s short portfolio will match the duration of the long portfolio, with a targeted total duration exposure of zero years.
In comparison, the “Negative Duration” ETF will include short positions with a duration that exceed the duration of the long side, providing a targeted total duration exposure of negative five years. By taking a heavier weight toward short positions, the fund should do better in a rising rate environment.
The negative duration is “designed to have greater returns than an equivalent non-interest rate hedged investment when U.S. Treasury rates are rising significantly.”
Additionally, the WisdomTree BofA Merrill Lynch High Yield Bond Zero Duration Fund (NYSEArca: HYZD) will go long the BofA Merrill Lynch 0-5 Year U.S. High Yield Constrained Index and short U.S. Treasuries to maintain a portfolio with a zero duration. HYZD has a 0.43% expense ratio.