The ProShares High Yield—Interest Rate Hedged ETF offers high yield bonds and a built-in hedge against rising rates.
The fund's objective is to seek investment results, before fees and expenses, that track the performance of the Citi High Yield (Treasury Rate-Hedged) Index.
The index consists of a long position in high yield bonds and a duration-matched short position in US Treasury securities. The high yield portion of the index offers exposure to the more liquid, cash-pay bonds, including Rule 144A bonds issued by corporations.
To ensure diversification, only two issues per parent issuer are included and each issuer is limited to 2% of the market value of the index.
The duration-matched short position in US Treasury securities is constructed using three US Treasury securities of 2-, 5-, and 10-year maturities, in an attempt to balance the maturity distribution of the overall index.
The product will be listed on BATS at a cost of 0.5% after a 0.5% fee waiver.
This type of isolated credit play was actually first brought to market first, with the European Credit play through iShares Barclays Capital Euro Corporate Bond Interest Rate Hedged ETF last October.