The underling index is comprised of subgroups of the Bloomberg Barclays U.S. Aggregate Index, covering Treasuries, agencies, credit and securitized, with effective maturities generally shorter than five years – the ST Agg universe has historically had a duration of between two and three years.
The benchmark also uses a rules-based approach to re-weight subgroups to achieve higher yields and underweights low-yielding securities Treasuries, while managing risk through constraints on expected tracking error and turnover, as well as sector, duration, and credit exposure relative to the ST Agg Universe.
“In a market environment where every basis point counts, overweighting treasuries might not be your first stop on the road to income,” Kevin Flanagan, Senior Fixed Income Strategist at WisdomTree, said in a note. “SHAG may serve as a powerful tool for investors seeking to navigate a potential rising rate environment.”
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