DOWNERS GROVE, Ill., Sept. 22, 2016 /PRNewswire/ -- Invesco PowerShares Capital Management, LLC, a leading global provider of exchange-traded funds (ETFs), announced today the launch of PowerShares Variable Rate Investment Grade Portfolio (VRIG). The ETF will be actively managed by IFI, which collectively has more than 34 years of experience in fixed income investing.
With global interest rates at historical lows due to fiscal stimulus, VRIG offers investors a fixed income alternative that may benefit from rising short term rates. Rather than trying to time when interest rates may rise, the ETF seeks to be defensively positioned for higher short term rates, providing investors with the opportunity for current income.
"With structural money market reform coming in October, we are pleased to be adding VRIG to our ETF lineup of variable rate products, said Dan Draper, Global Head of PowerShares. "Companies across the U.S. have not experienced real rate increases for years, but with Libor rising they may have to pay higher rates on their loans while new money market rules could also slow demand for short-term debt."
The addition of VRIG expands PowerShares industry leadership position with more than $6B in assets under management (AUM) in floating and variable rate ETFs.
VRIG will focus on investment grade assets with ample liquidity across a broad spectrum of asset classes. Broadly, the ETF will focus investments in floating rate US Treasuries, government sponsored agency mortgage-backed securities, US Agency debt, structured securities and floating rate investment grade corporates.
"IFI's investment process has many potential benefits which are derived from our proprietary credit research that incorporates loan, property and borrower-level analytics as well as continuous risk management," said Tony Semak, Senior Client Portfolio Manager at Invesco. "We are pleased to be collaborating with PowerShares to bring this unique product offering to the market."
The ETF will not utilize leverage, nor will it employ derivative positions. The IFI team has a long history in Agency MBS, Non-Agency MBS, ABS, CMBS and corporate bonds. In addition, the investment team has been involved with ABS, CMBS and RMBS since the early years of those markets.
The investment team's process, rooted in quantitative research, offers a comprehensive approach to credit analytics and continuous risk management. The investment team within IFI manages a mortgage REIT, which was the first blind pool financials IPO post-financial crisis. Additionally, the team was chosen by the US Treasury Department to participate in the Public Private Investment Program (PPIP) in 2009. PPIP was a plan designed to value and remove troubled assets from the balance sheet of troubled financial institutions in the US.
VRIG will primarily invest in variable and floating rate investments, which have coupons that adjust with short term interest rates. Should short term rates increase, the variable rate coupons are designed to adjust upward and produce a higher yield. Conversely, should short rates decrease, the yield of variable rate securities will be lower. Additionally, as the result of their significantly lower durations relative to fixed rate bonds, prices of variable and floating rate bonds have generally fared better in rising rate environments.
VRIG also has the ability to predominantly invest in flight-to-quality assets such as US Treasuries and other government debt should the residential or commercial credit cycle turn or global market liquidity become impaired.
To learn more about PowerShares fixed income ETFs, please visit our Innovative Income Solutions page: https://www.invesco.com/portal/site/us/financial-professional/etfs/strategies/quest-for-income/
About Invesco PowerShares Capital Management LLC and Invesco, Ltd.
Invesco PowerShares Capital Management LLC is leading the Intelligent ETF Revolution® through its family of 140 domestic and international exchange-traded funds, which seek to outperform traditional benchmark indexes while providing advisors and investors access to an innovative array of focused investment opportunities. With U.S. franchise assets over $96 billion as of June 30, 2016. PowerShares ETFs trade on both US stock exchanges. For more information, please visit us at invescopowershares.com or follow us on Twitter @PowerShares.
Invesco Ltd. is a leading independent global investment management firm, dedicated to helping investors worldwide achieve their financial objectives. By delivering the combined power of our distinctive investment management capabilities, Invesco provides a wide range of investment strategies and vehicles to our clients around the world. Operating in more than 20 countries, the firm is listed on the New York Stock Exchange under the symbol IVZ. Additional information is available at www.invesco.com.
Correlation is the degree to which two investments have historically moved in relation to each other.
Duration is a measure of the sensitivity of the price of a fixed-income investment to a change in interest rates.
There are risks involved with investing in ETFs, including possible loss of money. Actively managed ETFs do not necessarily seek to replicate the performance of a specified index. Actively managed ETFs are subject to risks similar to stocks, including those related to short selling and margin maintenance. Ordinary brokerage commissions apply. The Fund's return may not match the return of the Index. The Fund is subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the Fund.
The investment techniques and risk analysis used by the portfolio managers may not produce the desired results.
Fixed-income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer's credit rating. Junk bonds involve a greater risk of default or price changes due to changes in the issuer's credit quality. The values of junk bonds fluctuate more than those of high quality bonds and can decline significantly over short time periods.
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 engage in frequent trading of its portfolio securities in connection with the rebalancing or adjustment of the underlying index.
The Fund is non-diversified and may experience greater volatility than a more diversified investment. The Fund may hold illiquid securities that it may be unable to sell at the preferred time or price and could lose its entire investment in such securities.
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.
If interest rates fall, it is possible that issuers of callable securities will call or prepay their securities before maturity, causing the Fund to reinvest proceeds in securities bearing lower interest rates and reducing the Fund's income and distributions.
Risks of collateralized loan obligations include the possibility that distributions from collateral securities will not be adequate to make interest or other payments, the quality of the collateral may decline in value or default, the collateralized loan obligations may be subordinate to other classes, values may be volatile, and disputes with the issuer may produce unexpected investment results. Defaulted securities involve the substantial risk that principal will not be repaid and may be subject to restrictions on resale.
An investment in exchange-traded funds (ETFs) may trade at a discount to net asset value, fail to develop an active trading market, halt trading on the listing exchange, fail to track the referenced index, or hold troubled securities. ETFs may involve duplication of management fees and certain other expenses. Certain of the ETFs the fund invests in are leveraged, which can magnify any losses on those investments.
For mortgage-backed securities, if interest rates rise, borrowers may prepay mortgages more slowly than originally expected. This may further reduce market value and lengthen durations.
Instruments issued by government agencies, including the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"), are generally only backed by the general creditworthiness and reputation of the issuing government agency and are not backed by the full faith and credit of the US government. As a result, there is uncertainty as to the current status of many obligations that are placed under conservatorship of the federal government.
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.
Preferred securities may include provisions that permit the issuer to defer or omit distributions for a certain period of time, and reporting the distribution for tax purposes may be required, even though the income may not have been received. Further, preferred securities may lose substantial value due to the omission or deferment of dividend payments.
Reinvestment risk is the risk that a bond's cash flows (coupon income and principal repayment) will be reinvested at an interest rate below that on the original bond.
Obligations issued by US Government agencies and instrumentalities may receive varying levels of support from the government, which could affect the Fund's ability to recover should they default.
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 50,000, 75,000, 100,000 or 200,000 shares.
PowerShares® is a registered trademark of Invesco PowerShares Capital Management LLC, investment adviser. Invesco PowerShares Capital Management LLC (Invesco PowerShares) and Invesco Distributors, Inc., ETF distributor, are indirect, wholly owned subsidiaries of Invesco Ltd.
Note: Not all products available through all firms. 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 invescopowershares.com for the prospectus/summary prospectus.
SOURCE Invesco PowerShares Capital Management, LLC