WisdomTree (WETF), the fifth-largest U.S. ETF issuer, has filed plans with the U.S. Securities and Exchange to possibly introduce an ETF that is a bearish play on Japanese government bonds.
The WisdomTree Japan Bond Bear Strategy Fund would track the WisdomTree Japan Bond Bear Strategy Index. That index combines bearish exposure to Japanese bonds with long exposure to the equivalent U.S. bonds, according to ETF Express. The filing did not include a ticker or expense ratio, indicating a launch date is not imminent.
“The short positions in the Index include equally-weighted Japanese Government Bonds (JGBs) that comprise substantially all of the short positions and are designed to hedge Japanese interest rate sensitivity. The short positions are anticipated to have higher returns as Japanese interest rates increase and lower returns as Japanese interest rates decrease. The long positions in the Index include equally-weighted T-Bills that have a remaining maturity of greater than or equal to 1-month and less than three months. The long positions are designed to capture the returns of T-Bills. The Index is rebalanced on a monthly basis to where the dollar amount of the long exposure is equivalent to the dollar amount of the short exposure,” ETF Express reported, citing the SEC filing.
WisdomTree has already found considerable success with Japan ETFs as the WisdomTree Japan Hedged Equity Fun (DXJ) has hauled in more than $8.8 billion in assets this year. That makes DXJ this year’s top asset-gathering ETF by a wide margin over the second-place iShares Russell 2000 ETF (IWM) . [Japan ETFs' Long-Term Allure Does Battle With Yen's Safe-Have Status]
If the WisdomTree Japan Bond Bear Strategy Fund comes to market, it would compete with ETNs such as the PowerShares DB Inverse Japanese Govt Bond Futures Exchange Traded Notes (JGBS) and the PowerShares DB 3x Inverse Japanese Govt Bond Futures Exchange Traded Notes (JGBD).
An ETF designed to profit declines in Japanese bonds could be well-timed. Japan, the world’s third-largest economy, is looking enact Nippon Individual Savings Accounts, or Nisas. That program will allow Japanese citizens over the age of 20 to invest $10,100 a year for five years without paying capital gains or dividend taxes and is aimed at increasing equity ownership in levels in Japan.
WisdomTree Japan Hedged Equity Fund
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of DXJ and IWM.
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