BlackRock’s (NYSE: BLK) iShares unit, the world’s largest issuer of exchange traded funds, has introduced four new bond ETFs, including two corporate bond funds that feature interest rate hedging strategies.
The actively managed iShares Interest Rate Hedged Corporate Bond ETF (NYSEArca: LQDH) holds a position in the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYESArca: LQD) and shorts Treasuries in an effort to mute interest rate risk.
LQD, the largest corporate bond ETF with $17.7 billion in assets under management, debuted in 2002 as the first bond ETF to list in the U.S. LQDH features an annual expense ratio of 0.45%, according to iShares data.
LQDH has a high-yield equivalent in the form of the iShares Interest Rate Hedged High Yield Bond ETF (NYSEArca: HYGH). HYGH, which is also actively managed, holds a long position in the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) while also shorting Treasuries.
HYGH charges 1.15% per years, according to iShares data.
Some interest rate hedged ETFs have gained support among investors. For example, the ProShares High Yield-Interest Rate Hedged (BATS: HYHG) debuted a year ago and had $120.2 million in assets under management at the end of the first quarter, according to ProShares.
HYHG tries to reflect the performance of the Citi High Yield (Treasury Rate-Hedged) Index, which tracks a basket of high-yield bonds with a built-in hedge against rising interest rates. The fund tracks bond securities issued from the U.S. or Canada with at least one year remaining to maturity. [High Yield ETFs to Combat Rising Rates]
HYHG has a 30-day SEC yield of 4.68% and a duration of -0.17 years.
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of HYG and LQD.