Market Vectors ETF Trust announced today that it has launched the Market Vectors Treasury-Hedged High Yield Bond ETF (NYSEArca:THHY), an exchange-traded fund (ETF) is designed to combine the income potential of high-yield corporate bonds with the interest rate hedging capability offered by shorting Treasury notes.
“I believe it is not a question of if, but rather when, we will begin to see rising interest rates,” said Fran Rodilosso, Fixed Income Portfolio Manager with Market Vectors. “Predicting when rates will ascend again is obviously the hard part. With THHY, investors have the ability to better position their bond portfolios now for a rising interest rate environment, but they can do so while still earning income on the fund and even have upside potential during a low interest rate environment.”
THHY seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors® U.S. Treasury-Hedged High Yield Bond Index (MVTHHY), which was designed to provide exposure to below-investment grade corporate bonds, denominated in U.S. dollars, and, through the use of 5-year U.S. Treasury notes, to hedge against the price sensitivity to interest rate fluctuations of the bonds included in the Index.
The long positions in THHY’s underlying index are comprised of U.S. below-investment grade corporate bonds, denominated in U.S. dollars. Qualifying securities must have a below-investment grade rating (based on an average ratings of Moody’s, S&P and/or Fitch) and at least one year remaining to final maturity, a fixed coupon schedule, and a minimum amount outstanding of $500 million. The short positions in the Index are composed of current 5-year United States Treasury notes in the equivalent dollar amount of the long high-yield positions at every rebalance date. The Fund and its underlying index do not currently use any swaps or derivatives.
Market Vectors points out that an investment of this kind is not without risks, including those associated with high-yield securities, such as sensitivity to adverse economic changes or individual issuer developments, as well as liquidity concerns, credit risk, interest rate risk and risks associated with hedging.
THHY is the latest addition to Market Vectors’ innovative family of high-yield bond ETFs, including International High Yield Bond ETF (NYSEArca:IHY), Emerging Markets High Yield Bond ETF (NYSEArca:HYEM), and Fallen Angel High Yield Bond ETF (NYSEArca:ANGL). As of December 31, 2012, the total assets for the seven ETFs in this group amounted to approximately $1.5 billion. These ETFs allow investors to gain exposure to important segments of the high-yield market that, in the past, may have been difficult to access.
THHY, Market Vectors’ 52nd ETF, has a gross expense ratio of 1.51 percent and a net expense ratio of 1.45 percent, with the fund’s expenses capped at 0.50 percent until September 1, 2014. Cap excludes certain expenses, such as interest.
About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family totaled $27.9 billion in assets under management, of December 31, 2012, making it the fifth largest ETP family in the U.S. and eighth largest worldwide as.
Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and managed approximately $36.6 billion in investor assets as of December 31, 2012.
The Fund is subject to risks associated with investing in high-yield securities; which include a greater risk of loss of income and principal than funds holding higher-rated securities; concentration risk; credit risk; hedging risk; interest rate risk; and short sale risk. Investors should be willing to accept a high degree of volatility and the potential of significant loss. For a more complete description of these and other risks, please refer to the Fund’s prospectus and summary prospectus. The Fund may loan its securities, which may subject it to additional credit and counterparty risk.
Market Vectors U.S. Treasury-Hedged High Yield Bond Index (the “Index”) is the exclusive property of Market Vectors Index Solutions GmbH (the “Index Provider”), which has contracted with Interactive Data Pricing and Reference Data, LLC. (the “Calculation Agent “) to calculate the Index. The Calculation Agent is not an adviser for or a fiduciary to any account, fund or ETF managed by Van Eck Associates Corporation. Calculation Agent is not responsible for any direct, indirect, or consequential damages associated with indicative optimized portfolio values and/or indicative intraday values. Market Vectors Treasury-Hedged High Yield Bond ETF (the “Fund”) is not sponsored, endorsed, sold or promoted by the Index Provider, which makes no representation regarding the advisability of investing in the Fund.
The “Net Asset Value” (NAV) of a Market Vectors exchange-traded fund (ETF) is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF’s intraday trading value. Market Vectors ETF investors should not expect to buy or sell shares at NAV.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 888.MKT.VCTR or visit marketvectorsetfs.com. Please read the prospectus and summary prospectus carefully before investing.
Van Eck Securities Corporation, Distributor, 335 Madison Avenue, New York, NY 10017
Mike MacMillan/Chris Sullivan