Betashares has introduced four funds offering leveraged long and short exposure to the fluctuations in the prices of 10-year Australian and US Treasury government bonds.
The Betashares Geared Long Australian Government Bond Fund (ASX: GGAB) and Betashares Geared Short Australian Government Bond Fund (BBAB) will allow investors to take a leveraged position on the rise or fall of Australian government bond prices.
The Betashares Geared Long US Treasury Bond Fund (GGFD) and Betashares Geared Short US Treasury Bond Fund (BBFD) are currency-hedged variants that will provide investors the same opportunity with US Treasury bonds.
The two Australian funds will buy and sell futures contracts via the Australian Securities Exchange 10-year Australian Treasury Bond Futures, while the American variants obtain their exposure via the CME Ultra 10-year US Treasury Note Futures market.
The investment manager stated it introduced the funds to allow experienced non-institutional investors to manage interest rate risk in their portfolios and gain access to the bond market without the complexities and significant upfront capital typically associated with such investments.
“Our new range of geared fixed income exposures can play a helpful role in allowing investors and asset allocators navigate different market conditions in a more convenient investment vehicle,” Betashares chief executive Alex Vynokur said.
The long options in these funds generate amplified returns based on the upward movement of Australian or US Treasury bond prices, with proportional decreases if the prices fall. The short options generate magnified returns that are inversely correlated with the decline in the respective reference bond prices, resulting in decreases if the bond prices increase.
Betashares specified a 1 per cent increase in the value of the reference bonds tracked on a specific day is expected to result in a 2.5 per cent to 3 per cent rise in the value of the Betashares long bond fund.
Conversely, if there is a 1 per cent decline in the value of the reference bonds, it is anticipated to lead to a 2.5 per cent to 3 per cent increase in the value of the Betashares short bond fund.
Betashares’ offering of cash, hybrids and fixed income funds now includes 18 funds and recently passed $10 billion in funds under management.