HYGH - HYGH: Removing Rate Risk Keeping Credit Risk

2024-04-21 13:13:23 ET

Summary

• The iShares Interest Rate Hedged High Yield Bond ETF (HYGH) offers investors exposure to high-yield corporate bonds while mitigating interest rate risk.
• HYGH achieves this by investing in the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and maintaining short positions in interest rate swaps.
• The fund has a high level of diversification and offers an attractive return potential, but comes with the inherent credit risk of investing in high-yield bonds.

Hedging overlays have helped a lot in this cycle for bonds. But the question ultimately comes down to what factor it is you want to hedge against. In the bond fund world, hedges tend to be focused more on interest rate risk rather than default risk. This matters more for junk debt portfolios, where bankruptcy can get priced in quickly when volatility rises for all assets. One fund that is designed to shield investors from interest rate risk while exposing them to the creditworthiness of high yield bonds is the iShares Interest Rate Hedged High Yield Bond ETF ( HYGH )....

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