Sweta Killa: AdvisorShares, the Maryland-based ETF issuer leading the active ETFs space, continues its expansion of innovative products in accordance with the small investment firms.
The issuer has rolled out AdvisorShares YieldPro ETF providing investors a new play in the high yield space with enhanced protection from volatility. Its latest foray into the space comes from The Elements Financial Group, which is acting as the portfolio manager for YPRO. The latest addition raises the existing active ETFs line-up to 24.
YPRO in Focus
The new ETF is a fund of funds that looks to offer investors current income and capital appreciation by investing in both long and short positions across a variety of fixed income ETFs or other income producing ETFs.
In the portfolio construction of YPRO, the manager will pursue attractive yield and handle volatility through a quantitative approach to risk budgeting, which also includes the use of options to hedge residual equity and interest rate risk when needed. Due to this unique selection of bond ETFs, the fund seeks to provide diversification benefits across multiple fixed income segments.
Currently, this strategy produces a well-diversified fund of funds that has long positions in over two dozen ETFs. Top three holdings, at the time of writing, include PowerShares Preferred Portfolio (PGX), Peritus High Yield ETF (HYLD – ETF report) and Vanguard Intermediate-Term Corporate Bond ETF (VCIT) with 15.04%, 13.84% and 12.45% share, respectively (read: HYLD: The Best Choice Among High Yield Bond ETFs?).
Investors should note that the fund has a somewhat-high expense ratio when compared to index funds as the net expense comes in at 1.42%.
How does this fit in a portfolio?
The new product appears an interesting choice for investors seeking yield maximization in the current low interest environment while targeting a lower level of risk. This is because YPRO’s unique combination of risk budgeting and hedging provides less volatility, high flexibility and low correlations to the equity market.
With modest tapering underway, a cushion against rising rates has become necessary. With the launch of YPRO, investors could smartly manage interest rate risk given the fund’s innovative approach and risk-adjusted returns with competitive yields.