ProShares Launches Only Corporate Bond Fund1 With Substantially All Assets AAA-Rated2
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New ETF Provides U.S. Investors Access to Covered Bonds
BETHESDA, MD, MAY 23, 2012—ProShares, a premier provider of alternative exchange traded funds (ETFs), today announced the launch of ProShares USD Covered Bond (NYSE: COBO). This new ETF is the only corporate bond fund1—mutual fund or ETF—in the U.S. with substantially all of its assets rated AAA.2 COBO lists on NYSE Arca today.
COBO invests in covered bonds, a type of collateralized corporate debt typically issued by non-U.S. financial institutions. Covered bonds are a popular investment outside the U.S. but not broadly accessible in the U.S. until today.
"Many investors are interested in high credit quality bonds, but the supply of AAA-rated corporate debt in the U.S. is very limited," said Michael L. Sapir, Chairman and CEO of ProShare Advisors LLC, ProShares' investment advisor. "COBO, a first-of-its-kind ETF, fills the gap by accessing the highest-rated segment of the $3 trillion,3 240-year-old4 covered bond market."
COBO seeks to match the performance of the BNP Paribas Diversified USD Covered Bond Index, before fees and expenses. The index tracks the performance of a portfolio of AAA-rated covered bonds, which are denominated in U.S. dollars. Each bond must be AAA-rated by at least one independent rating agency.
More about Covered Bonds
The first covered bond was created in 1769 in Prussia by Frederick the Great in the aftermath of the Seven Years' War. In 1900, the German "Mortgage Bank Act" came into effect, setting up the essential principles that govern much of the covered bond market today.5 Since then, issuance of covered bonds in Europe and other parts of the world has grown significantly. The global covered bond market is estimated to be approximately $3 trillion outstanding.
High Credit Quality
Covered bonds are different from typical U.S. corporate debt in that, in the event of a default, covered bondholders not only have a senior unsecured claim against the issuer but also a preferential claim to a segregated, actively maintained "cover pool" of assets. The dual coverage from the issuer and the cover pool typically makes covered bonds a high credit quality investment. COBO focuses exclusively on the highest-rated covered bonds.
Currently, AAA-rated covered bonds have higher yields than U.S. Treasury and AAA-rated U.S. corporate debt of similar duration.6
About ProSharesProShares is the country's fourth most successful exchange traded fund (ETF) company, with 133 funds and more than $23 billion in assets.7 ProShares' lineup includes the largest family of geared (leveraged and inverse) ETFs.8 ProShare Advisors and ProShare Capital Management are affiliated with ProFund Advisors, which was founded in 1997. Together, they manage more than $28 billion in ETF and mutual fund assets.9
Tucker Hewes, Hewes Communications, Inc., 212.207.9451, firstname.lastname@example.org
ProShares, 866.776.5125, ProShares.comMay 23, 2012
1 Publicly available fund. Source: Morningstar.
2 AAA ratings are as of the time of index rebalancing. The Fund’s index considers ratings from Fitch, Standard & Poor's and Moody's. To be considered AAA-rated, a bond must satisfy one of the following: 1) The bond is rated by all three agencies, and is rated AAA by two of them; 2) The bond is rated by only two agencies, and is rated AAA by both of them; 3) The bond is rated by only one agency, and is rated AAA.
3 Barclays Global Covered Bond Index guide, September 2011, ProShares.
4 Goldman Sachs "Covered Bond" presentation, March 2011.
5 LBBW Credit Research "Covered Bonds—European Banks' Secret Funding Weapon," June 2010.
6 As of May 18, 2012. Source: Bloomberg, Barclays, BNP, ProShares. Past performance does not guarantee future results. All investments have unique features and risks you should consider before investing. Treasurys, for example, are backed by the full faith and credit of the federal government, and principal is guaranteed when held to maturity, while corporate and covered bonds have no such guarantee.
7 Source: Financial Research Corporation, based on analysis of organic net sales of U.S. exchange traded products (as of 6/30/2011). Assets as of March 31, 2012.
8 Source: Lipper, based on a worldwide analysis of all known providers of funds in these categories. The analysis covered ETFs and ETNs by the number of funds and assets, as of June 30, 2011.
9 Assets as of March 31, 2012.