The Federal Reserve is under constant watch with market participants attempting to predict the timing of the next increase in the Federal funds rate. When the hike does occur there will undoubtedly be a significant impact on asset prices around the world, most notably a direct decrease in the value of fixed income exchange-traded funds. This is due to the inverse relationship between interest rates and bond prices. Duration is commonly used to measure the effect of this; however, the measure does suffer from a limitation as it guides the investor to the size of a fall in bond prices for a uniform upwards shift of interest rates at all points along the yield curve, which is historically unlikely. ProShares, a US-based ETF provider, highlights the impact of this in a recent research paper and draws attention to interest-rate hedged ETFs designed to mitigate it.

Speaking at a conference earlier this week, Larry Fink, chief executive and chairman of BlackRock, the parent of iShares, argued that leveraged exchange-traded products represent “a structural problem that could blow up the whole industry one day”. He also asserted that iShares, the world’s largest provider of ETFs, “would never do a leveraged ETF”. His views, however, have not gone down well with all ETP industry participants, least of all with the providers of such products, which include major companies such as ProShares, Direxion and Boost ETP, a subsidiary of WisdomTree.

Flows into ETFs and ETPs listed in the United States rebounded in March gathering net inflows of $10.9 billion which, when combined with a small positive market performance in the month, pushed assets in the global ETF/ETP industry to a new record high of $1.73 trillion, according to ETFGI’s latest quarterly global ETF and ETP industry insights report. At the end of Q1 2014, there were 1,568 ETFs/ETPs listed in the United States, from 57 providers on 3 exchanges.

The ProShares High Yield-Interest Rate Hedged ETF (HYHG) has garnered more than $100 million in assets since its launch in May 2013. The fund provides diversified exposure to high-yield bonds while seeking to mitigate the impact of interest rate movements. Michael Sapir, Chairman and CEO of ProShare Advisors, said: “Many investors have been attracted to the income of high-yield bonds but are concerned about rising rates. We believe investors have embraced HYHG because it goes beyond other ways to mitigate the effect of rising rates”.

By David Stevenson. It is, of course, one of the least well kept secrets within the shady world of international finance, that at some stage our collective national pension scheme pots will be mutilated by a substantial fall in the value of government securities particularly, and bonds generally, following an interest rate increase. Fortunately for investors there’s a whole host of innovative ETFs out there to help mitigate portfolios from such a scenario.

ProShares, a US-based provider of exchange-traded funds, best known for its leveraged long and short line-up, has announced the launch of the ProShares Short Term USD Emerging Markets Bond ETF (EMSH) on the BATS Exchange. The ETF is the first short-term emerging markets bond ETF in the United States and is designed to offer attractive yield potential with reduced interest rate sensitivity.

ProShares, a US-based provider of alternative exchange-traded funds, has announced the launch of ProShares Investment Grade – Interest Rate Hedged ETF (IGHG), the first investment-grade bond ETF in the United States that provides a built-in hedge against rising interest rates. Listed on the US-based BATS Exchange, the new ETF targets a duration of zero by shorting Treasury futures.

ProShares, a US-based provider of alternative exchange-traded funds, has launched a new ETF providing exposure to the most dependable dividend-yielding constituents of the S&P 500 Index. Listed on the NYSE Arca, the ProShares S&P 500 Aristocrats ETF (NOBL) is linked to the S&P 500 Dividend Aristocrats Index, an index measuring the performance of those companies within the S&P 500 that have followed a managed-dividends policy of consistently increasing dividends every year for at least 25 years.

Some of the largest and most popular exchange-traded funds (ETFs) linked to the semiconductor industry are set for a makeover following a re-ranking of the index they track. Among the funds affected are the iShares PHLX Semiconductor ETF (SOXX), the Direxion Daily Semiconductor Bull 3x Shares ETF (SOXL) and the Direxion Daily Semiconductor Bear 3x Shares ETF (SOXS).

Goldman Sachs, Visa and Nike are to join the Dow Jones Industrial Average, arguably the world’s most famous stock market gauge. They will replace Bank of America, Hewlett-Packard and Alcoa after the close of trading on Friday, 20th September. A number of exchange-traded funds listed around the world will be affected by the change, the largest being the NYSE Arca-listed SPDR Dow Jones Industrial Average ETF (DIA), which has more than $11 billion in assets under management.