Invesco PowerShares rolls out variable-rate high-grade portfolio ETF

By Wendy Van Sickle

Columbus, Ohio, Sept 22 – Invesco PowerShares Capital Management, LLC launched the PowerShares Variable Rate Investment Grade Portfolio (VRIG) exchange-traded fund.

The ETF will be actively managed by Invesco Fixed Income, PowerShares said in a news release.

With global interest rates at historic lows, VRIG offers a fixed-income alternative that may benefit from rising short-term rates. Instead of attempting to predict when interest rates will rise, the ETF seeks to be poised for higher short-term rates.

"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, said in the release. "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."

VRIG will target investment grade assets with high liquidity across a spectrum of asset classes, including floating-rate U.S. Treasuries, government-sponsored agency mortgage-backed securities, U.S. agency debt, structured securities and floating-rate investment grade corporate assets.

"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," Tony Semak, senior client portfolio manager at Invesco, added in the release.

The ETF will not utilize leverage or employ derivative positions. It will invest primarily in variable-rate investments with coupons that adjust with short-term interest rates. If short-term rates increase, the variable-rate coupons are designed to adjust upward and produce a higher yield. If short-term rates decrease, the yield will be lower.

Downers Grove, Ill.-based Invesco PowerShares Capital Management is a provider of exchange-traded funds.

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