Invesco Adds New Defined Maturity Bond ETFs to Robust Fixed Income Suite
Invesco announced the addition of two new BulletShares ETFs to its fixed income lineup on June 12, 2024. These ETFs, the BulletShares 2034 Corporate Bond ETF (BSCY) and the BulletShares 2032 High Yield Corporate Bond ETF (BSJW), aim to offer higher yields and better visibility on potential returns. The BulletShares ETFs combine the advantages of ETF investing with the benefits of individual bonds, including increased liquidity, low costs, and broad diversification. These new products are designed to hedge against interest rate volatility and provide investors with monthly income and cash distribution at termination. Invesco also offers a BulletShares ETF Bond Ladder Tool to help investors manage their income streams and risk exposure effectively.
- Invesco added two new BulletShares ETFs to its fixed income lineup, potentially increasing its market share in the ETF segment.
- The new ETFs offer high yields and better visibility on potential returns, attractive for income-focused investors.
- BulletShares ETFs provide increased liquidity and broad diversification, beneficial for risk management.
- The ETFs are designed to hedge against interest rate volatility, appealing to investors concerned about rising rates.
- Invesco offers a BulletShares ETF Bond Ladder Tool for better income and risk management, enhancing investor experience.
- The funds do not guarantee a return of the original investment amount at maturity, posing a risk for investors.
- Frequent trading may increase the cost of investing in these ETFs due to ordinary brokerage commissions.
- The ETFs will terminate on or about December 15 of the calendar year in their names, which might not align with all investors' time horizons.
Insights
Invesco's addition of two new BulletShares ETFs is significant for investors interested in the fixed income market. These new funds, Invesco BulletShares 2034 Corporate Bond ETF and Invesco BulletShares 2032 High Yield Corporate Bond ETF, provide targeted exposure to corporate bonds with specific maturity dates. This is particularly beneficial in a rising interest rate environment as these ETFs can act as a hedge against interest rate volatility, offering more predictable return streams compared to traditional bond funds.
Unlike traditional bond funds, BulletShares ETFs have a predetermined termination date, which can help investors better manage cash flows and avoid the reinvestment risk typically associated with bond fund investments. This structure offers a combination of liquidity, lower costs and broad diversification. However, it should be noted that the fund does not guarantee a return of the principal amount at maturity, which is a key difference from individual bonds.
Investors should consider the expense ratio and the potential for lower transaction costs due to the ETF's liquid nature. These factors can contribute to overall portfolio efficiency, especially for those implementing a bond ladder strategy using the BulletShares ETF Bond Ladder Tool provided by Invesco.
In the short term, these new ETFs may attract investors looking for higher yield opportunities within the corporate bond market, particularly in the high-yield segment, which is generally more volatile but offers higher returns. In the long term, the predictability and structured nature of these ETFs can be a valuable addition to an investor's portfolio, aiding in better financial planning and risk management.
From a market perspective, Invesco's strategy to expand their BulletShares suite targets a growing demand for tailored fixed income investment products. Investors are increasingly looking for ways to mitigate interest rate risk while maximizing yields and BulletShares ETFs cater to this need by offering a diversified approach with a fixed maturity date.
The BulletShares ETF Bond Ladder Tool is particularly noteworthy as it allows investors to build customized bond ladders. A bond ladder is a portfolio of bonds with different maturity dates, helping to spread out the risks and returns over time. This tool can simplify the process for individual investors, providing a systematic approach to managing income streams and preserving capital.
While the addition of these two new ETFs enhances product offerings, it also reflects Invesco's commitment to adapting to market conditions and investor needs. With the SEC's focus on transparency and liquidity, BulletShares ETFs meet regulatory requirements by providing daily portfolio disclosures.
However, as with any investment, it's important to consider the associated risks. The high-yield segment, for example, is prone to higher default rates, which can impact returns. Investors should thoroughly evaluate their risk tolerance and investment objectives before committing to these funds.
Two new BulletShares ETFs are now available to replace maturing funds
"With higher-for-longer interest rate expectations top of mind for investors, the unique structure of Invesco's BulletShares suite continues to attract those who want to hedge against interest rate volatility," said Jason Bloom, Head of Fixed Income and Alternative ETF Strategy at Invesco. "These new maturities offer the potential to take advantage of elevated yields while providing better visibility on potential return streams versus other traditional fund vehicles."
BulletShares ETFs seek to combine the advantages of ETF investing with the benefits of individual bonds by offering increased liquidity,1 relatively low costs2 and broad diversification. This offers the potential ability for monthly income and cash distribution at termination,3 acting like an individual bond.
The new BulletShares ETFs offer investors access to several of the fixed income sectors not captured in broad fixed income benchmarks,4 such as high yield corporate bonds, in a structure with a predetermined termination date that aligns with the maturity year or expected call date of the bonds held5 in its transparent6 ETF portfolio. The two new ETFs are:
- Invesco BulletShares 2034 Corporate Bond ETF (BSCY)
- Invesco BulletShares 2032 High Yield Corporate Bond ETF (BSJW)
Invesco also offers the BulletShares ETF Bond Ladder Tool to provide a convenient way to build a hypothetical laddering strategy with BulletShares ETFs, based on maturity and credit criteria, that can help investors better manage their income stream and risk exposure. Visit BulletShares fixed Income ETFs for additional details about the full suite.
For more information about Invesco's fixed income ETFs, please visit: Invesco Fixed Income ETFs.
- Shares are not individually redeemable and owners of the Shares may acquire those Shares from the Fund and tender those Shares for redemption to the Fund in Creation Unit aggregations only, typically consisting of 100,000 or 150,000 Share
- Since ordinary brokerage commissions apply for each buy and sell transaction, frequent trading activity may increase the cost of ETFs.
- The funds do not seek to return any predetermined amount at maturity, and the amount an investor receives may be worth more or less than their original investment. In contrast, when an individual bond matures, an investor typically receives the bond's par (or face value).
- Bloomberg Aggregate Bond Index only tracks the broad performance of the
U.S. investment-grade bond market. An investment cannot be made directly into an index. - The funds will terminate on or about December 15 of the calendar year included in each fund's name.
- ETFs disclose their full portfolio holdings daily.
About Invesco Ltd.
Invesco Ltd. (Ticker NYSE: IVZ) is a global independent investment management firm dedicated to delivering an investment experience that helps people get more out of life. Our distinctive investment teams deliver a comprehensive range of active, passive and alternative investment capabilities. With offices in more than 20 countries, Invesco managed US
Important Information
Not a Deposit | Not FDIC Insured | Not Guaranteed by the Bank | May Lose Value | Not Insured by any Federal Government Agency
Unlike individual bonds, bond funds have fees and expenses and most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible. The funds do not seek any predetermined amount at maturity, and the amount an investor receives may be worth more or less than the original investment. In contrast, an individual bond matures; an investor typically receives the bond's par or (face value).
About Risk
There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. The Fund's return may not match the return of the Underlying Index. The Funds are subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the Funds.
BSCY
Investments focused in a particular industry or sector are subject to greater risk, and are more greatly impacted by market volatility than a more diversified investment.
The Fund is non-diversified and may experience greater volatility than a more diversified investment.
Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa.
During the final year of the Fund's operations, as the bonds mature and the portfolio transitions to cash and cash equivalents, the Fund's yield will generally tend to move toward the yield of cash and cash equivalents and thus may be lower than the yields of the bonds previously held by the Fund and/or bonds in the market.
An issuer may be unable or unwilling to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer's credit rating.
The risks of investing in securities of foreign issuers can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.
Income generated from the Fund is based primarily on prevailing interest rates, which can vary widely over the short- and long-term. If interest rates drop, the Fund's income may drop as well. During periods of rising interest rates, an issuer may exercise its right to pay principal on an obligation later than expected, resulting in a decrease in the value of the obligation and in a decline in the Fund's income.
An issuer's ability to prepay principal prior to maturity can limit the Fund's potential gains. Prepayments may require the Fund to replace the loan or debt security with a lower yielding security, adversely affecting the Fund's yield.
The Fund currently intends to effect creations and redemptions principally for cash, rather than principally in-kind because of the nature of the Fund's investments. As such, investments in the Fund may be less tax efficient than investments in ETFs that create and redeem in-kind.
Unlike a direct investment in bonds, the Fund's income distributions will vary over time and the breakdown of returns between Fund distributions and liquidation proceeds are not predictable at the time of investment. For example, at times the Fund may make distributions at a greater (or lesser) rate than the coupon payments received, which will result in the Fund returning a lesser (or greater) amount on liquidation than would otherwise be the case. The rate of Fund distribution payments may affect the tax characterization of returns, and the amount received as liquidation proceeds upon Fund termination may result in a gain or loss for tax purposes.
During periods of reduced market liquidity or in the absence of readily available market quotations for the holdings of the Fund, the ability of the Fund to value its holdings becomes more difficult and the judgment of the Sub-Adviser may play a greater role in the valuation of the Fund's holdings due to reduced availability of reliable objective pricing data.
The Fund's use of a representative sampling approach will result in its holding a smaller number of securities than are in the underlying Index, and may be subject to greater volatility.
BSJW
Investments focused in a particular industry or sector are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments.
The Fund may invest in privately issued securities, including 144A securities which are restricted (i.e. not publicly traded). The liquidity market for Rule 144A securities may vary, as a result, delay or difficulty in selling such securities may result in a loss to the Fund.
Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa.
During the final year of the Fund's operations, as the bonds mature and the portfolio transitions to cash and cash equivalents, the Fund's yield will generally tend to move toward the yield of cash and cash equivalents and thus may be lower than the yields of the bonds previously held by the Fund and/or bonds in the market.
An issuer may be unable or unwilling to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer's credit rating.
The values of junk bonds fluctuate more than those of high-quality bonds and can decline significantly over short time periods
The risks of investing in securities of foreign issuers can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.
Income generated from the Fund is based primarily on prevailing interest rates, which can vary widely over the short- and long-term. If interest rates drop, the Fund's income may drop as well. During periods of rising interest rates, an issuer may exercise its right to pay principal on an obligation later than expected, resulting in a decrease in the value of the obligation and in a decline in the Fund's income.
An issuer's ability to prepay principal prior to maturity can limit the Fund's potential gains. Prepayments may require the Fund to replace the loan or debt security with a lower yielding security, adversely affecting the Fund's yield.
The Fund currently intends to effect creations and redemptions principally for cash, rather than principally in-kind because of the nature of the Fund's investments. As such, investments in the Fund may be less tax efficient than investments in ETFs that create and redeem in-kind.
Restricted securities generally cannot be sold to the public and may involve a high degree of business, financial and liquidity risk, which may result in substantial losses to the Fund.
Unlike a direct investment in bonds, the Fund's income distributions will vary over time and the breakdown of returns between Fund distributions and liquidation proceeds are not predictable at the time of investment. For example, at times the Fund may make distributions at a greater (or lesser) rate than the coupon payments received, which will result in the Fund returning a lesser (or greater) amount on liquidation than would otherwise be the case. The rate of Fund distribution payments may affect the tax characterization of returns, and the amount received as liquidation proceeds upon Fund termination may result in a gain or loss for tax purposes.
During periods of reduced market liquidity or in the absence of readily available market quotations for the holdings of the Fund, the ability of the Fund to value its holdings becomes more difficult and the judgment of the Sub-Adviser may play a greater role in the valuation of the Fund's holdings due to reduced availability of reliable objective pricing data.
The Fund's use of a representative sampling approach will result in its holding a smaller number of securities than are in the underlying Index, and may be subject to greater volatility.
The opinions expressed herein are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
Before investing, investors should carefully read the prospectus/summary prospectus and carefully consider the investment objectives, risks, charges and expenses. For this and more complete information about the Fund call 800 983 0903 or visit invesco.com for the prospectus/summary prospectus.
Invesco Distributors, Inc. is the US distributor for Invesco's retail products and private placements. Each entity is an indirect, wholly owned subsidiary of Invesco Ltd.
06/24 NA3628425
Media Relations Contact: Rachael Peng, 713.21.4193, rachael.peng@invesco.com
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SOURCE Invesco Ltd.
FAQ
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