With an interest rate hike from the Federal Reserve imminent, advisors are pondering how they can generate income within client portfolios while simultaneously mitigating interest rate risk.
A new breed of exchange traded funds can help. These ETFs hedge exposure to rising interest rates by lowering an ETF’s duration to hardly noticeable levels or, in some cases, employing negative duration.
On the upcoming webcast, Managing Risk With Interest-Rate Hedged ETFs, Deutsche Asset & Wealth Management (Deutsche AWM) Managing Director Bill Chepolis, Caprin Asset Management Managing Director Peyton Studebaker and Deutsche AWM ETF Regional Vice President Lance Allen will discuss the advantages of interest rate hedged ETFs and some new ideas for accessing the asset class.
The webcast is Thursday, April 23 at 2 PM Eastern Time and is accepted for one hour of CFP & CIMA, CIMC or CPWA CE Credit for attendees.
One of the most prominent themes in the ETF industry dating back to last year has been investors’ increased interest in low duration bond funds as a means of protecting portfolios against what many believe is an inevitable rise in interest rates.
Issuers have met that increased interest with a growing number of bond ETFs that target exceptionally low, and in some cases, negative duration as wells funds that offer interest rate hedges.
In March, Deutsche AWM introduced the Deutsche X-trackers Investment Grade Bond – Interest Rate Hedged ETF (NYSEArca: IGIH), the Deutsche X-trackers High Yield Corporate Bond – Interest Rate Hedged ETF(NYSEArca: HYIH) and the Deutsche X-trackers Emerging Markets Bond – Interest Rate Hedged ETF (NYSEArca: EMIH). [Deutsche Adds Three New Bond ETFs]
The Deutsche X-trackers High Yield Corporate Bond – Interest Rate Hedged ETF tracks the DBIQ High Yield Corporate Bond – Interest Rate Hedged Index, “which aims to mitigate exposure if interest rate sensitivity across the yield curve in a rising rate environment,” according to Deutsche AWM. The new ETF holds 67 issues with a yield to worst of 4.9%
The Deutsche X-trackers Investment Grade Bond – Interest Rate Hedged ETF “seeks to track the performance, before fees and expenses, of the DBIQ Investment Grade Corporate Bond – Interest Rate Hedged Index, which aims to mitigate exposure of interest rate sensitivity across the yield curve in a rising rate environment,” according to the issuer.
The Deutsche X-trackers Emerging Markets Bond – Interest Rate Hedged ETF holds dollar-denominated emerging markets debt from Brazilian, Colombian and Russian issuers, among others. The new ETF’s underlying index had a duration of just 0.01 years at the end of January, according to Deutsche AWM data.
Financial advisors who are interested in learning more about the rate-hedged fixed-income strategies can register for the Thursday, April 23 webcast here.