RISE “is designed to profit as rates rise by using derivative hedges tied to two- and five-year Treasurys,” reports Katy Burne for the Wall Street Journal.
“The weighting of the Treasury Instruments constituting the Benchmark Portfolio Index will be based on each maturity’s duration contribution. The expected range for the duration weighted percentage of the 2 year and 5 year maturity Treasury Instruments will be from 30% to 70%. The expected range for the duration weighted percentage of the 10 year maturity Treasury Instruments will be from 5% to 25%,” according to Rise.
Negative duration ETFs try to profit off a rising rate environment by heavily using short contracts to capitalize on falling bond prices if rates do rise. However, due to the more aggressive nature of this strategy, these types of ETFs will underperform if rates fall.
RISE charges 0.5% per year.
ETF Trends editorial team contributed to this post.