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By DailyAlts Staff Bond prices have been falling over the past several months as investors are becoming increasingly convinced that the Federal Reserve will hike short-term interest rates in the U.S. later this year for the first time since 2006. Higher short-term borrowing rates will increase the rates of return demanded by investors, and newly issued bonds with higher interest rates will make existing bonds at fixed yields less attractive by comparison – this will be bearish for the bond market. Higher rates are also likely to give the dollar strength, relative to foreign currencies, since higher-yielding currencies are more attractive to foreign investors. These factors make for a challenging environment for investors, but fortunately, new liquid alternative products have been designed to address the challenges of higher interest rates and a volatile foreign exchange market. Two such products – the Global X YieldCo Index ETF (NASDAQ: YLCO ) , offering non-bond investment income; and the PowerShares Europe Currency Hedged Low Volatility Portfolio ETF (NYSEARCA: FXEU ) , providing European equity exposure without the currency risk – both launched in May. YieldCo Index ETF YieldCos are an “emerging asset class of income-generated assets,” according to a statement announcing the launch of the Global X YieldCo Index ETF. Most YieldCos, which are often compared to Master Limited Partnerships (MLPs), are in the renewable energy sector. “YieldCos exhibit three key investment characteristics many investors have been looking for: high current income, lower volatility, and the potential for dividend growth,” according to Jay Jacobs, a research analyst at Global X Funds. YieldCos are typically formed when existing energy companies spin off assets such as wind or solar farms, with long-term contracts designed to return cash to shareholders. Unlike MLPs, YieldCos are set up as traditional corporations and therefore don’t require K-1 tax forms. “We are excited to provide investors with access to a new source of potential alternative income, which has traditionally been limited to MLPs and REITs,” said Mr. Jacobs. “YLCO allows investors to participate in this growing field of yield-generating renewable energy projects.” The expense ratio for YLCO is 0.65%. For more information, visit the ETF’s fund page at globalxfunds.com . Currency-Hedged Low Volatility The PowerShares Europe Currency Hedged Low Volatility Portfolio ETF is based on the S&P Eurozone Low Volatility USD Hedged Index, and aims to provide investors with exposure to European stocks without the currency risk and with dampened volatility. The index is based on a simple methodology: The 80 stocks from the S&P Eurozone BMI Index with the lowest realized volatility over the past 12 months are selected and then weighted inversely according to volatility. The portfolio is then 100% currency-hedged to the U.S. dollar using rolling one-month forward contracts that are adjusted monthly. “International investing is often accompanied by the risks of uncertain stock selection and foreign exchange fluctuations,” said Dan Draper, Managing Director and Head of Invesco PowerShares, in a recent statement. “FXEU allows participation in the European equity market’s potential upside while aiming to protect portfolios from potential market downturns.” The expense ratio for FXEU is 0.25%. For more information, visit the fund’s product page . Scalper1 News
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