(New York)

Today we wanted to write a story covering the topic of rate hedged ETFs. We have been examining these lately and feel they are in high demand because of the need for stable income for retirees and the still-relevant threat of higher rates. Mortgage REIT ETFs, such as iShares’ REM really caught our eye with 9%+ yields. However, they are very rate sensitive, so we wanted to find a better option. Enter ProShares’ HYHG, or the High Yield-Interest Rate Hedged ETF. The fund yields over 6% in a highly hedged manner, it goes long high yield US and Canadian debt and simultaneously shorts US Treasuries. The expense ratio is 0.50% and the fund has $127 under management.

FINSUM: This seems like a great fund to us—6% income with only 50 basis points in fees, all in a rate hedged package.

(New York)

Investors are anxious about the chances of a recession right now. While the Fed doesn’t seem likely to hike us into one any longer, economic fundamentals have just begun to show cracks. It started with housing, then job growth for February, and now it is jobless claims. Jobless claims rose by 6,000 last week after a long stretch of falling numbers. Weekly numbers are seen as less reliable than monthly figures because of random gyrations, but the data could indicate the economy is starting to soften.

FINSUM: It is too early to tell whether this is indicative of a coming softening or just an aberration, but certainly something to pay attention to.

(Washington)

Beto O’Rourke, long expected to step into the race for the Democratic bid, has finally announced he will. The young Texan lost a close race to Ted Cruz in Texas in November, but is aiming to ride his surge in popularity to the White House. Unlike many other contenders from the Democratic party, he is more of a centrist, not adopting the now-common socialist platform. Commenting on his candidacy, Beto says “The challenges that we face right now, the interconnected crises in our economy, our democracy and our climate have never been greater. They will either consume us, or they will afford us the greatest opportunity to unleash the genius of the United States of America”.

FINSUM: Outside of maybe Bernie Sanders, we think Beto is the biggest contender to Trump because he may be able to simultaneously get voters on the far left and some of Trump’s more centrist supporters.

(New York)

Well, it has finally happened, but not as anyone expected. The whole industry has been watching for the first zero fee ETF, which just happened with SoFi, but now they are getting the first negative fee ETF. While zero fee index mutual funds debuted last year, ETFs only just got there, until the debut of the SALT Financial Low TruBeta US Market ETF. For every $10,000 invested in the new fund, the issuer will pay you $5. However, as you may have expected, there is a catch. The catch is that once the fund gets over $100m in AUM, its regular fee of 0.29% kicks in.

FINSUM: This is nothing more than a sales gimmick (and they haven’t even structured it well). However, it is indicative of the trend things are heading in.

(New York)

Morgan Stanley just put a big threat on the table, and they are not alone. The bank says that it may withdraw wealth management services entirely from states considering new fiduciary rules, such as Nevada. Wells Fargo issued a similar threat. A number of states, including Nevada, New York, New Jersey, and Maryland, are considering making their own fiduciary rules. Such rules would be a major headache to the brokerage industry as they would create patchwork rules across the country. Morgan Stanley said bluntly “Absent substantial changes to the [state] proposal, Morgan Stanley will be unable to provide brokerage services to residents of the state of Nevada”. Edward Jones, TDA, and Charles Schwab also said they would need to at least pair back offerings.

FINSUM: This is a strong move by the brokerage industry but we do not think it will work. The political mood in the states mean lawmakers would rather say “good riddance” than back off, but time will tell.