Activity on the product development front is firing on all cylinders for Guggenheim today; the industry veteran is launching three fixed income funds to add to its growing lineup of target date bond offerings. The new ETFs, which begin trading on the NYSE Arca this morning, will offer investors a creative way to tap into the high yield corner of the fixed income market by focusing on securities with a given maturity date [see also Better-Than-AGG Total Bond Market ETFdb Portfolio]. The new ETFs are:
- BulletShares 2016 High Yield Corporate Bond ETF (BSJG)
- BulletShares 2017 High Yield Corporate Bond ETF (BSJH)
- BulletShares 2018 High Yield Corporate Bond ETF (BSJI)
Each of the new ETFs will charge 0.42% in expense fees and will be structured similar to the existing lineup of BulletShares products; the funds will hold a portfolio of high yield corporate bonds that is scheduled to reach maturity in the indicated year. BulletShares separate themselves from traditional bond ETFs because as the specified maturity date approaches, the Guggenheim funds will make a distribution to shareholders (and then close down), instead of reinvesting the proceeds [see Bond ETFs For Every Objective].
Under The Hood: BulletShares
The BulletShares ETF family separates itself from the majority of bond products by delivering a “cash flow experience” that more closely matches that of an actual bond investment. Most fixed income ETFs operate indefinitely, meaning they offer exposure to a portfolio of debt that meets certain criteria without actually holding the securities to maturity. As such, BulletShares separate themselves from traditional bond funds by offering a scheduled return of the initial investment to investors upon maturity [see Fixed Income ETF Center].
The ETF structure allows for instant diversification of credit risk; the underlying portfolio will hold bonds from dozens of different issuers in a variety of industries.
The BulletShares ETFs have become quite popular with investors, pulling in more than $1 billion in aggregate assets across all products.
The existing lineup of high yield offerings from the BulletShares family includes:
- BulletShares 2012 High Yield Corporate Bond ETF (BSJC)
- BulletShares 2013 High Yield Corporate Bond ETF (BSJD)
- BulletShares 2014 High Yield Corporate Bond ETF (BSJE)
- BulletShares 2015 High Yield Corporate Bond ETF (BSJF)
Simply put, BulletShares can be expected to behave like an actual bond investment; investors receive interest payments over the life of the debt note, as well as a return of capital when maturity is reached [see also Guggenheim Debuts Three More BulletShares Bond ETFs]. For this reason, the appeal of BulletShares is fairly straightforward. Unlike traditional bond ETFs which maintain a relatively stable duration, the interest rate risk component associated with BulletShares ETFs should decline over time as the given maturity date approaches.
The BulletShares product suite also includes products that target investment grade corporate bonds, with maturities ranging from 2012 (BSCC) through 2020 (BSCK).
Disclosure: No positions at time of writing.