Invesco extended its BulletShares bond exchange traded fund suite with two new options to help investors gain defined maturity exposure and add on to a bond ladder portfolio strategy through investment-grade and speculative-grade corporate debt.
On Thursday, Invesco launched the BulletShares 2028 Corporate Bond ETF (NYSEArca: BSCS) and BulletShares 2026 High Yield Corporate Bond ETF (NYSEArca: BSJQ), which have a 0.10% and 0.42% expense ratio, respectively.
“Using BulletShares as a means of holding bonds to maturity may help to insulate investors from the risk of rising rates, while further adding value by solving the headache of finding and trading individual bonds,” Jason Bloom, Director of Global Macro ETF Strategy at Invesco, said in a note.
The BulletShares ETF suite tries to combine the advantages of ETF investing with the benefits of individual debt exposure, including the potential ability to match income with future cash-flow needs. The BulletShares ETFs are designed to offer income-seeking investors an easily accessible means of building or managing a laddered income stream.
These defined-maturity bond funds typically buy bonds that mature in the year the ETF will terminate, ensuring that investors can collect the bonds’ face value at maturity, along with a steady income stream along the way. As such, investors are meant to buy-and-hold these securities until maturity.
While financial advisors and investors have implemented this strategy through individual debt securities, crafting bond ladders with individual bonds can be time consuming and cost prohibitive. Alternatively, investors can utilize target-date bond ETFs to easily create a bond ladder strategy.
Target-Date Bond ETF Strategy
In contrast, a regular bond ETF runs the risk of losing its original principal if interest rates go up, depending on the bond ETF’s effective duration, since the typical bond funds would buy and sell debt securities to maintain their target short-, intermediate- or long-duration strategy.
“The longer maturity date of the two new Invesco BulletShares ETFs will further democratize the bond laddering process for investors, offering a convenient and liquid way to meet the market for defined income needs,” Dan Draper, Global Head of ETFs at Invesco, said in a note. “Invesco is committed to accelerating growth in the BulletShares suite to provide even better value to existing and future shareholders of the decade-old product line. These new ETFs elevate the goal-oriented investment experience for smaller investors who may not necessarily have the ability to invest individual bond ladders.”
With the addition of the two newly launched BSCS and BSJQ, the full suite of funds now has defined years of maturity ranging from 2018 to 2028. Each of ETF within the suite will terminate on December 31 of its respective maturity year and would subsequently make a cash distribution to the then-current shareholders of its net assets.
For more information on new fund products, visit our new ETFs category.