The ProShares High Yield-Interest Rate Hedged ETF (BATS: HYHG) has reached the important $100 million in assets under management milestone in less than 10 months of trading.
“Many investors have been attracted to the income of high yield bonds but are concerned about rising rates,” said Michael Sapir, Chairman and CEO of ProShare Advisors LLC, in a statement. “We believe investors have embraced HYHG because it goes beyond other ways to mitigate the effect of rising rates, like short-term bond funds.”
HYHG’s ascent to $100 million in assets is impressive given the short time frame which the fund has accomplished the feat. HYHG had less than $64 million in AUM at the end of last year, according to issuer data.
The timing of HYHG’s debut was excellent as the fund came to market just as investor were becoming skittish about the effects Federal Reserve tapering would have on interest rates. Soon after, 10-year Treasury yields spiked, highlighting the utility of HYHG, which targets zero duration.
The ETF’s underlying “index is designed to provide diversified exposure to a liquid portfolio of high yield bonds while seeking to mitigate the impact of interest rate movements. To be included in the index, bonds must have a minimum issue size of $1 billion USD, be issued within the past five years and have at least one year remaining to maturity. No more than two issues from an issuer are allowed, and no more than 2% of the index is allocated to a single issuer,” said ProShares in the statement.
As of Feb. 28, HYHG had an effective duration of negative 0.29 with a 30-day SEC yield of 4.74% and weighted average yield to maturity of 6.58%.
Duration is a measure of the fund’s sensitivity to changes in interest rates. A low duration typically corresponds with a lower interest rate risk. Interest rates have an inverse relationship to bond prices – rising rates translates to falling bond prices. HYHG achieves a near negligible duration by taking short positions in Treasury securities. [A High-Yield Bond ETF for Rising Rates]
To be included in HYHG, bonds must be issued by U.S. or Canadian firms with a minimum size of $1 billion and at least one year remaining until maturity. The maximum credit rating on the Standard & Poor’s scale allowed by the ETF is BB+.
ProShares High Yield-Interest Rate Hedged ETF
ETF Trends editorial team contributed to this post.