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PowerShares’ Short-Dated Junk ETF Live Thurs

Olly Ludwig

Invesco PowerShares on Thursday will launch a short-term, high-yield global bond ETF that it first put into registration about three months ago, bringing competition and a bit more variety to a portion of the yield-focused investment world that’s currently inhabited by one very successful fund.

The PowerShares Global Short Term High Yield Bond Portfolio (PGHY) will have an annual expense ratio of 0.35 percent, or $35 per $10,000 invested. That’s 5 basis points cheaper than the SPDR Barclays Capital Short Term High Yield Bond ETF (SJNK), a U.S.-focused high-yield fund.

The new PowerShares high-yield fund will cast a wider net than SJNK, owning both public- and private-dollar-denominated bonds that are investment grade and global in scope. The debt has “a grade of BBB- or higher from Fitch and S'P or of Baa3 or higher from Moody’s,” according to the fund prospectus. Holdings are no more than three years from maturity.

PGHY will serve up access to a relatively safe, short-dated corner of the fixed-income world that offers protection from potentially large losses that holders of longer-dated bonds would face in the event of a downside bond market correction.

The fund comes at a critical juncture as bond investors start to look for ways to protect themselves from what a rise in inflation could do to prices of existing bonds. Concentrating holdings on the short end of the yield curve—and on a relatively high-yielding note—looks to be one of the simplest ways of achieving this objective, even if short-term fixed-income holdings won’t entirely escape the effects of a bond market sell-off.

The proposed junk ETF is roughly comparable to SJNK, a security that targets high-yield U.S. corporate credits ranging from very-short-dated bills to five-year notes, though, again, PGHY is globally focused.

SJNK, which has gathered upward of $1.5 billion since its rollout a bit more than a year ago.


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