ProShares, the Bethesda, MD-based sponsor of exchange-traded funds best known for its leveraged and inverse funds, has launched the ProShares Short Term USD Emerging Markets Bond ETF (EMSH). The firm is the nation’s largest provider of alternative ETFs with more than 140 products and has been attempting to expand its footprint in the regular unleveraged ETF segment as of late.
EMSH is the first short-term dollar-denominated emerging markets bond ETF to be launched in the US. The fund aims to reduce price volatilities arising out of interest rate changes and offers attractive yield potential for investors worried about rising interest rates.
The fund tracks the DBIQ Short Duration Emerging Market Bond Index, a benchmark developed by Deutsche Bank that includes a diversified portfolio of US dollar-denominated emerging market bonds with a dollar-weighted average maturity of three years or less. The debt issuers include sovereign governments, non-sovereign government agencies and corporations with sizable government ownership; i.e. the so-called quasi-sovereigns.
Deutsche Bank currently determines countries that qualify as emerging markets while the index currently includes bonds from sovereigns or other qualifying entities domiciled in 19 such countries.
The index consists of both investment grade and below investment grade bonds, but excludes callable, putable, zero coupon, inflation-linked and convertible bonds. Also, eligible bonds need to have a minimum amount outstanding of $500 million.
For diversification and risk mitigation purposes, exposure to a particular issuer from any country is capped at 10 percent. While Ukraine tops the chart with 11 percent of total allocation, Russia, Turkey Brazil and Venezuela each make up more than 9 percent.
While cash flows from maturing issues and coupon payments are reinvested every month, the index is rebalanced or reconstituted every quarter. As of 11/15, the index had a yield-to-maturity (YTM) of 4.49 percent and a Modified Duration of 2.19 years.
The fund has an annual expense ratio of 0.5 percent.
Disclosure: No holdings
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