Invesco PowerShares filed regulatory paperwork to bring to
market a short-term global bond fund serving up access to a
relatively safe corner of the ETF market that offers protection
from potentially large losses that holders of longer-dated bonds
would face in the event of a bond-market meltdown.
The PowerShares Global Select Short Term Bond Portfolio will be
based on the DB Global Dynamic Short Maturity Bond Index, which
selects both public and private dollar-denominated bonds that are
investment grade-having "a grade of BBB- or higher from Fitch and
S&P or of Baa3 or higher from Moody's," according to the
prospectus. The holding also must be no more than three years from
PowerShares' fund comes at a possibly 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 looks to
be one of simplest ways of achieving this objective, even if
short-term fixed-income holdings would entirely escape the effects
of a bond market sell-off.
The proposed ETF will find itself in the middle of the pack in
terms of maturity relative to a number of other popular funds on
the market, such as the nearly $10 billion iShares Barclays 1-3
Year Credit Bond Fund (NYSEArca:CSJ) or the more than $10 billion
Vanguard Short Term Bond ETF (NYSEArca:BSV).
Notably, it will have longer maturity than cash-equivalent funds
on the market, such as the FlexShares Ready Access Variable Income
ETF (NYSEArca:RAVI), which goes out to two years on the curve; and
the Pimco Enhanced Short Maturity Strategy Fund (NYSEArca:MINT),
which goes out one year. RAVI now has $7.5 million in assets, while
MINT has $2.59 billion, according to data compiled by
The fund, which doesn't yet have a price tag or a ticker, will
have its primary listing on Arca, the New York Stock Exchange's
electronic trading platform.
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