ProShares, a premier provider of alternative ETFs, today launched two
funds that provide pure exposure to the credit component of the high
yield bond market uncoupled from the interest rate component. ProShares
CDS North American HY Credit ETF (TYTE) and ProShares CDS Short North
American HY Credit ETF (WYDE) are listed on the BATS exchange.
“TYTE and WYDE have a variety of uses in sophisticated portfolios,” said
Michael L. Sapir, Chairman and CEO of ProShare Advisors LLC. “For
instance, WYDE can be used to hedge against the credit risk in high
yield bonds. With TYTE, investors can obtain exposure to the high yield
bond market without the risk associated with rising interest rates.”
While a wide selection of ETFs providing pure exposure to corporate
credit have long been available in Europe, TYTE and WYDE are the first
launched in the United States.
About TYTE and WYDE
TYTE and WYDE get pure exposure to changes in credit spreads by
investing in index-based credit default swaps (CDS), instruments that
reflect the market’s view of a bond issuer’s credit quality. The funds’
exposure is not leveraged.
The CDS market is generally viewed as the most efficient and liquid
market for protection against corporate bond defaults. With more than $8
billion in average daily trading volume, the market for high yield CDS
has been more liquid than the high yield bond market itself. The
volatility of the high yield CDS market has been lower than equities and
comparable to the high yield bond market.* CDS transactions are cleared
through a central clearinghouse.
About ProShares
ProShares offers the nation’s largest lineup of alternative ETFs. We
help investors to go beyond the limitations of conventional investing
and face today’s market challenges. ProShares helps investors build
better portfolios by providing access to alternative investments
delivered with the liquidity, transparency and cost effectiveness of
ETFs. Our lineup of over 145 alternative ETFs can help you reduce
volatility, manage risk and enhance returns.
*Volatility (measured by standard deviation) for MARKIT CDX.NA.HY 5-year
TOTAL RETURN INDEX, a benchmark for the high yield CDS market, has from
its 2007 inception through June 30, 2014 ranged from 6% to 14% compared
to 4% to 16% for the Barclays U.S. Corporate High Yield Index and 11% to
46% for the S&P 500®. Average daily volume for CDX.HY was
$8 billion for the two-year period through June 30, 2014. This was more
liquid than the comparable high yield bond market activity levels of $6
billion.
Investing involves risk, including the possible loss of principal.
ProShares ETFs are generally non-diversified and each entails certain
risks, including risks associated with the use of derivatives (swap
agreements, futures contracts and similar instruments), leverage and
market price variance, all of which can increase volatility and decrease
performance. Narrowly focused investments typically exhibit higher
volatility. Please see their summary and full prospectuses for a more
complete description of risks. There is no guarantee any ProShares
ETF will achieve its investment objective.
These ETFs are actively managed and there is no guarantee investments
selected and strategies employed will achieve the intended results.
Active management may also increase transaction costs. Risks related to
credit default swaps (“CDS”) may include lack of an active market and
difficulty in valuation. Because these ETFs are exposed to high yield
credit, there may be greater levels of credit, liquidity and valuation
risk than for higher rated instruments. Short ETFs generally lose value
as the underlying credit market improves. Investors should actively
manage and monitor their investments. These ETFs may not be suitable for
all investors.
These ETFs participate in BATS Global Market’s Competitive Liquidity
Provider (“CLP”) Program. Participation in the BATS CLP Program (http://www.batstrading.com/listings/market_maker/etp/)
may have potential impacts on the price and liquidity of the security.
In particular, there could be adverse impacts on a purchaser’s sale of
an ETF that leaves the program. ProShares pays a fee for each ETF
participating in the BATS CLP Program. Payment of a CLP Fee is intended
to generate more quotes and trading than might otherwise exist absent
this payment. Learn more by visiting http://www.proshares.com/resources/bats_clp_program.html.
Carefully consider the investment objectives, risks, charges and
expenses of ProShares before investing. This and other information can
be found in their summary and full prospectuses. Read them carefully
before investing.
ProShares are distributed by SEI Investments Distribution Co., which is
not affiliated with the funds' advisor or sponsor.
Copyright Business Wire 2014