Helping investors better manage interest rate risk in the changing environment ahead, Guggenheim Invetments expanded on its suite of defined maturity BulletShares exchange traded funds for those crafting a bond ladder strategy.
On Wednesday, Guggenheim rolled out the Guggenheim BulletShares 2027 Corporate Bond ETF (NYSEArca: BSCR) and the Guggenheim BulletShares 2025 High Yield Corporate Bond ETF (NYSEArca: BSJP). BSCR has a 0.24% expense ratio and BSJP comes with a 0.42% expense ratio.
BSCR will try to reflect the performance of the Nasdaq BulletShares USD Corporate Bond 2027 Index, which tracks investment-grade corporate bonds with effective maturities in the year 2027, and the fund will terminate on or about December 31, 2027.
BSJP will try to reflect the performance of the Nasdaq BulletShares USD High Yield Corporate Bond 2025 Index, which includes high yield corporate bonds with effective maturities in the year 2025, and the fund will terminate on or about December 31, 2025.
“Our investment-grade and high yield BulletShares offer investors a creative way to tap into the fixed-income market by focusing on securities with a given maturity date,” William Belden, Managing Director, Head of ETF Business Development at Guggenheim Investments, said in a note. “The defined-maturity feature continues to be an effective investment strategy for investors looking to save for life events like retirement and college amid a volatile economic environment.”
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.
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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.
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.
“Bond laddering offers a number of potential benefits, but creating bond ladders with individual bonds can be time consuming and cost prohibitive,” Belden added. “In contrast, Guggenheim BulletShares ETFs offer investors a cost-effective and convenient approach to portfolio laddering.”
For more information on new fund products, visit our new ETFs category.