Fight Interest Rate Hike With This New ETF

Global X recently launched a new ETF in order to fight rising rate worries in the United States.  The name of the fund is Global X Interest Rate Hedge ETF IRHG. Let’s take a look inside the fund and find out how time-sensitive the launch is.

IRHG in Focus

IRHG looks to achieve its investment objective of providing a hedge against a sharp increase in long-term U.S. interest rates by using over-the-counter (OTC) instruments that are typically only accessible to institutional investors.

By holding options designed to benefit from rising long-term interest rates, IRHG provides access to an efficient fixed income hedging strategy designed to offset interest rate risk in a portfolio. IRHG may invest in U.S. Treasury bills directly or through other ETFs.

The fund charges 45 bps in fees. About 10% of the fund is dedicated to cash holdings.

How Does It Fit In a Portfolio?

The year 2022 as a whole could easily be attributed to the Russia-Ukraine war, red-hot inflation and rising-rate worries. No wonder, such worries caused an upheaval in the market this year. Heightened rising rate worries amid super-hawkish cues from the Fed have bummed out Wall Street this year.

Federal Reserve officials agreed last month that interest rates may need to keep rising for longer to ward off higher inflation. Preventing inflation is the Fed’s first priority as the Fed won’t shift from its tighter policies even if that slowed the U.S. economy.

Officials hiked rates by 75 basis points in June, the most since 1994, lifting their benchmark to a target range of 1.5% to 1.75%. Policy makers supported raising rates faster in their upcoming meetings.

No wonder, the launch of the new interest-hedged ETF looks time-sensitive.

Competition

The fund is pretty unique in nature. There are not much products like this in the market. Some examples with the same investment objective are Simplify Interest Rate Hedge ETF PFIX, iShares Interest Rate Hedged High Yield Bond ETF HYGH, iShares Interest Rate Hedged Corporate Bond ETF LQDH andProShares Investment Grade-Interest Rate Hedged IGHG.

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ProShares Investment GradeInterest Rate Hedged (IGHG): ETF Research Reports
 
iShares Interest Rate Hedged High Yield Bond ETF (HYGH): ETF Research Reports
 
iShares Interest Rate Hedged Corporate Bond ETF (LQDH): ETF Research Reports
 
Simplify Interest Rate Hedge ETF (PFIX): ETF Research Reports
 
Global X Interest Rate Hedge ETF (IRHG): ETF Research Reports
 
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