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iShares unveils ultrashort bond ETF trio to fight rate rise risk
by Robert St George on Oct 17, 2013 at 12:31
Three new exchange-traded funds (ETFs) offering exposure to ultrashort bonds have been launched by iShares.
The iShares Euro Ultrashort Bond Ucits ETF, iShares Dollar Ultrashort Bond Ucits ETF and iShares Sterling Ultrashort Bond Ucits ETF, based on the Markit iBoxx Liquid Ultrashort indices, invest primarily in fixed and floating-rate investment-grade corporate bonds, with the fixed-rate bonds maturing within one year and the floating-rate bonds within three years.
The ETFs are designed to help investors mitigate the risks posed by potential rises in interest rates, while offering better returns than that available on cash.
‘Today’s market conditions have created significant demand for short and ultrashort duration strategies,’ explained Tom Fekete, head of product development in Europe, the Middle East and Africa for iShares.
‘Long-dated bonds are particularly impacted by rising interest rates, and fixed income investors are derisking by shifting their emphasis towards shorter duration bonds that are less exposed to changes in these rates.
‘At the same time, investors who have been on the sidelines of the market are looking for ways to increase their returns, and short-duration bonds can offer greater yield than some cash investments for those looking to put their cash to work.’
The ETFs are physically backed, with total expense ratios of 0.2%.