Guggenheim broadens range of “BulletShares” defined-maturity bond ETFs

Oct 21st, 2015 | By | Category: Fixed Income

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Guggenheim Investments, the global asset management firm, has announced the launch of the Guggenheim BulletShares 2023 High Yield Corporate Bond ETF (BSJN) and the Guggenheim BulletShares 2025 Corporate Bond ETF (BSCP), broadening their range of exchange-traded funds designed to help advisors and investors build bond laddering strategies.

BulletShares broaden range of defined-maturity bond ETFs

William Belden, Managing Director, Head of ETF Business Development at Guggenheim Investments.

Each Bulletshares ETF effectively functions as a single bond would, with periodic cash flows and a defined maturity date, as each bond holding has an effective maturity in the same calendar year. By combining funds of varying maturities, investors can build a portfolio that meets their future cash requirements or investment expectations.

These funds differ from traditional fixed-income ETFs which maintain a target duration by selling more mature bonds and buying newer issues. In comparison, the Bulletshares funds are designed to mature in their target year, offering investors a projected cash flow to meet expected liabilities, or the ability to reinvest proceeds in the future if they forecast interest rates to have risen by then.

“Our investment-grade and high yield BulletShares funds offer investors a creative way to tap into the fixed income market by focusing on securities with a given maturity date,” said William Belden, Managing Director, Head of ETF Business Development at Guggenheim Investments. “The defined-maturity feature continues to be an effective investment strategy for investors looking to save for life events like retirement and college costs amid a volatile economic environment.”

As bonds in a laddered portfolio mature, the cash distribution is generally utilised to cover lifestyle needs or reinvested in new bonds at the longest maturity of the ladder at the then current interest rate. Prior to maturity, this approach offers potential advantages in both rising and falling interest rate environments. “If interest rates increase, an investor can reinvest the proceeds, if any, from maturing bonds at higher interest rates,” Belden said. “If interest rates decrease, the investor potentially benefits from price appreciation as the portfolio’s higher-yielding bonds increase in value.”

The advantage of these funds is that they provide investors with a diversified basket of bonds to reduce credit risk and improve liquidity. “Bond laddering offers a number of potential benefits, but creating bond ladders with individual bonds can be time consuming and cost prohibitive,” said Belden. “In contrast, Guggenheim BulletShares ETFs offer investors a cost-effective and convenient approach to portfolio laddering.”

The Guggenheim BulletShares product suite now consists of 20 unique defined-maturity investment grade and high-yield corporate bond ETFs with maturity dates spanning from 2015 to 2025. The funds provide diversification by tracking indices of approximately 30 to 300 corporate bonds with effective maturities in the same calendar year as each fund’s maturity.

The Guggenheim BulletShares 2023 High Yield Corporate Bond ETF and the Guggenheim BulletShares 2025 Corporate Bond ETF have been listed on the NYSE Arca and carry a 0.42% and 0.24% total expense ratio respectively.

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