Increased confidence in ProShares Investment Grade—Intr Rt Hdgd's prospects relative to its Morningstar Category peers leads to an upgrade in this strategy's Morningstar Medalist Rating to Silver from Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy's sensible investment philosophy earns it an Above Average Process Pillar rating. The team managing this passive strategy earns a Below Average People Pillar rating. The strategy's parent organization is industry standard, albeit with some strong attributes like overall low fees, but is held back by an unfavorable average Morningstar Rating. This earns the firm an Average Parent Pillar rating.

Analyst Rating

ProShares Investment Grade—Intr Rt Hdgd earns an Above Average Process Pillar rating. Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. The primary contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Impressive risk-adjusted performance also strengthens the process. This can be seen in the fund's five-year alpha calculated relative to the category average, which suggests that the process was successful over that period. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 38%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is: 

The investment seeks investment results, before fees and expenses, that track the performance of the FTSE Corporate Investment Grade (Treasury Rate-Hedged) Index (the "index").  The index is comprised of (a) long positions in USD-denominated investment grade corporate bonds issued by both U.S. and foreign domiciled companies; and (b) short positions in U.S. Treasury notes or bonds ("Treasury Securities") of, in aggregate, approximate equivalent duration to the investment grade bonds. The fund will invest at least 80% of its total assets in component securities (i.e., and securities of the index) and invest at least 80% of its total assets in investment grade bonds.  

 This strategy's 12-month yield is 5.0%, which mirrors its average peer.

Above Average

Process

ProShares’s team receives a Below Average People Pillar rating. The team is supported by the portfolio managers' outperformance of peers at the funds they run, as measured by their combined three-year manager excess returns. However, the rating is held back by the parent firm's five-year success ratio of 27%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup. The instability of its management team also holds the team back. The fund last saw a manager change two years ago.

Below Average

People

In a competitive industry, ProShares doesn't differentiate itself enough, leading to an Average Parent Pillar rating. A strength of ProShares is that its product shelf of open-end and exchange-traded funds is, on average, offered at a minimal cost, suggesting that it considers what's best for its investor base. On average, fees for funds are in the lowest quintile of respective category peers. Looking at the firm's risk-adjusted performance, the product lineup compares similarly to competitors. Across its open-end and exchange-traded funds, the firm's average 10-year Morningstar Rating is 3.1 stars. ProShares has faced above-average manager turnover in the past five years. This is a concern, as long-term stability tends to support positive results.

Average

Parent

ProShares Investment Grade-Interest Rate Hedged

IGHG tracks an index with long exposure to USD-denominated investment-grade debt and short exposure to US Treasurys. The fund aims to minimize interest-rate risk.

ProShares Investment Grade—Interest Rate Hedged ETF offers a built-in hedge against rising interest rates while providing the opportunity for higher yields. IGHG maintains a diversified portfolio of investment-grade corporate bonds and takes short positions in Treasury futures to offset interest rate risk. IGHG offers diversification benefits, potential for higher yields, but does not mitigate credit risk and may have hedging imperfections.

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The bets over imminent Fed rate cuts weakened on central banks' cues. These ETFs that offer protection against rising rates are at a 52-week high currently.

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The ProShares Investment Grade—Interest Rate Hedged ETF is a fixed-income ETF that seeks to track the performance of the FTSE Corporate Investment Grade (Treasury Rate-Hedged) Index. IGHG has performed well in a rising rate environment, with only a small decline in 2022 and a significant increase in 2023. The fund hedges its duration component through short Treasury futures positions, but this strategy only produces positive results in a rising rates environment.

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For investors seeking momentum, ProShares Investment Grade-Interest Rate Hedged ETF IGHG is probably on radar. The fund just hit a 52-week high and is up 10.9% from its 52-week low price of $66.81/share.

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Rising Treasury yields often prompt advisors and investors to embrace short-term bonds and related exchange traded funds, but there are other ideas to consider, including rate-hedged bond ETFs. The ProShares Investment Grade-Interest Rate Hedged ETF (Cboe: IGHG) and ProShares High Yield Interest Rate Hedged ETF (Cboe: HYHG) are two rate hedged ETF strategies that try to eliminate rising rate risks.

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With interest rates suddenly jumping to a one-year high off historic lows, bond exchange traded fund investors may be interested in interest-rate hedged fixed-income strategies that could help mitigate further rate risks ahead. Specifically, the ProShares Investment Grade-Interest Rate Hedged ETF (Cboe: IGHG) and ProShares High Yield Interest Rate Hedged ETF (Cboe: HYHG) are two rate hedged ETF strategies that try [.

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The capital markets cheered the Federal Reserve’s move to further support the bond market by purchasing up individual debt as opposed to fixed income exchange-traded funds (ETFs).

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It comes as no surprise that bonds were the toast of the town versus equities during the height of the pandemic sell-off as investors took flight to safety. A deluge of capital into investment-grade bonds, in particular, have already spurred issuance to meet demand, resulting in double that of last year’s issuance.

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The Federal Reserve is no doubt doing its part to help support the economy by dumping trillions into businesses, which is helping to buoy the bond market. The capital markets are betting that even more action could be on the way, which should only help the bond markets even further.

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Exchange-traded funds (ETFs) are regarded for helping to inject liquidity into the bond markets and as such, the Federal Reserve is looking to snatch up these funds as opposed to actual debt issues. The Fed is planning to buy up to $100 billion in corporate debt, which should help fuel corporate bond ETFs.

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On the surface, it appears as though interest rate hedged ETFs need rates to rise to be successful.

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The ProShares Investment Grade—Intr Rt Hdgd (CBOE: IGHG) is designed to thrive when interest rates rise, but that doesn’t mean the ETF isn’t useful when rates are declining. Quite the contrary, IGHG is performing admirably this year and features a tempting to yield to help investors bolster income in today’s low yield environment.

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