iShares launches interest rate hedged ETFs

iShares is looking to take advantage of the increased investor concern about rising interest rates by launching two interest rate hedged exchange-traded funds (ETFs).

The ETF arm of BlackRock has launched sterling and dollar versions of the iShares Corporate Bond Interest Rate Hedged Ucits ETF on the London Stock Exchange today.

The physically-backed ETFs will “aim to mitigate interest rate risk by selling government bond futures and targeting a duration of zero”, giving the investors access to fixed income credit returns without the interest rate risk.

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The firm already has a euro version of the fund, which was launched in October 2012 and has attracted €280m in assets.

The funds have a total expense ratio of 0.25 per cent and the dollar fund tracks the Markit iBoxx USD Liquid Investment Grade index, while the sterling version tracks the Markit iBoxx GBP Liquid Corporates Large Cap index.