As the Federal Reserve plans a “gradual” interest rate tightening cycle, exchange traded fund investors will have to adjust their portfolios accordingly.
On the upcoming webcast, Positioning Portfolios in a Rising Rate Environment, Joe Benevento, CIO for Americans and Co-Head of Global Fixed Income at Deutsche Asset Management, Sebastien Galy, FX Strategist at Deutsche Bank, Chuck Self, CIO and COO of iSectors LLC, and Jack Fowler, V.P of Global Client Group for Deutsche Asset Management, will discuss strategies to help position client portfolios as the Federal Reserve hikes interest rates, along with the potential pace of tightening to expect ahead.
With yields ticking higher, bond investors can utilize rate-hedged bond ETFs to generate income and help better maintain their principle. Last year, DeAWM 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).
IGIH tracks investment-grade corporate bonds, HYIH includes a group of speculative-grade junk bonds and EMIH follows U.S.-dollar-denominated emerging market bonds. However, unlike traditional bond ETFs, these options try to mitigate interest rate sensitivity across the yield curve in a rising rate environment by taking short positions in U.S. Treasury futures.