News of interest rate hike sends investors scurrying.
iShares 0-5 High Yield Corporate Bond ETF, an Exchange-traded fund that tracks short-term junk bonds, has lost $1.5 billion since May 29.
According to Investment news, the $2.4 billion iShares 0-5 High Yield Corporate Bond ETF (SHYG) had “more than $465 million of outflows Wednesday, the most ever in a single day”.
This comes just after news from Federal Reserve officials on May 23 announcing another interest rate hike will be coming soon. The possibility of raised interest rates makes short-duration junk bonds undesirable.
Risks of Exchange-Traded Funds (ETFs)
ETFs are typically registered investment companies whose shares represent an interest in a portfolio of securities that track an underlying benchmark or index. Unlike traditional mutual funds, shares of ETFs typically trade throughout the day on a securities exchange at prices established by the market.
Leveraged inverse ETFs (a/k/a “ultra short” funds) seek to achieve a return that is a multiple of the inverse performance of the underlying index. An inverse ETF that tracks a particular index, for example, seeks to deliver the inverse of the performance of that index, while a 2x (two times) leveraged inverse ETF seeks to deliver double the opposite of that index’s performance.
To accomplish their objectives, leveraged and inverse ETFs pursue a range of investment strategies through the use of swaps, futures contracts, and other derivative instruments.
The best form of investor protection is to clearly understand leveraged or inverse ETFs before investing in them. No matter how you initially hear about them, it’s important to read the prospectus, which provides detailed information related to the ETFs’ investment objectives, principal investment strategies, risks, and costs.
If you have questions about an investment you made in an exchange-traded fund, or if you believe that you have been the victim of a securities fraud, The White Law Group may be able to help. To speak to a securities attorney, please call our offices at 888-637-5510 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.