AdvisorShares, the Maryland-based ETF issuer leading the active
ETFs space, continues its expansion of innovative products in
accordance with the small investment firms.
The issuer has rolled out
AdvisorShares YieldPro ETF (YPRO)
providing investors a new play in the high yield space with
enhanced protection from volatility. Its latest foray into the
space comes from The Elements Financial Group, which is acting as
the portfolio manager for YPRO. The latest addition raises the
existing active ETFs line-up to 24 (read:
PIMCO Files for More Active ETFs
YPRO in Focus
The new ETF is a fund of funds that looks to offer investors
current income and capital appreciation by investing in both long
and short positions across a variety of fixed income ETFs or other
income producing ETFs.
In the portfolio construction of YPRO, the manager will pursue
attractive yield and handle volatility through a quantitative
approach to risk budgeting, which also includes the use of options
to hedge residual equity and interest rate risk when needed. Due to
this unique selection of bond ETFs, the fund seeks to provide
diversification benefits across multiple fixed income segments.
Currently, this strategy produces a well-diversified fund of funds
that has long positions in over two dozen ETFs. Top three holdings,
at the time of writing, include PowerShares Preferred Portfolio (
), Peritus High Yield ETF (
) and Vanguard Intermediate-Term Corporate Bond ETF (
) with 15.04%, 13.84% and 12.45% share, respectively (read:
HYLD: The Best Choice Among High Yield Bond
Investors should note that the fund has a somewhat-high expense
ratio when compared to index funds as the net expense comes in at
How does this fit in a portfolio?
The new product appears an interesting choice for investors seeking
yield maximization in the current low interest environment while
targeting a lower level of risk. This is because YPRO's unique
combination of risk budgeting and hedging provides less volatility,
high flexibility and low correlations to the equity market.
With modest tapering underway, a cushion against rising rates has
become necessary. With the launch of YPRO, investors could smartly
manage interest rate risk given the fund's innovative approach and
risk-adjusted returns with competitive yields (read:
3 Bond ETFs Surging as Interest Rates Tumble
Though this new actively managed ETF of ETFs does not have any
direct competitor due to its unique long and short strategy, it
might still face tough competition from several products available
in the high yield space.
The most popular is
iShares iBoxx $ High Yield Corporate Bond ETF (
that has accumulated nearly $13.8 billion and charges 50 bps in
fees a year from investors. The fund has average maturity and
effective duration of 4.23 years and 3.90 years, respectively.
Another product is
SPDR Barclays Capital High Yield Bond ETF (
, which has $10.4 million in AUM and 0.40% in expense ratio. The
ETF targets intermediate end of the yield curve with average
maturity of 6.65 years and modified average duration of 4.08
Apart from these,
First Trust High Yield Long/Short ETF (
could pose a strong obstacle to the new entrant. This fund seeks to
provide a high level of income while reducing the interest rate
risk to some extent (see:
all High Yield ETFs here
HYLS intends to maintain both long and short positions - long
positions in high-yield debt securities, including U.S. and
non-U.S. corporate debt obligations, bank loans and convertible
bonds, and short positions in high yield U.S. Treasuries and
corporate bonds. The fund charges 1.28% in annual fees.
The new ETF from AdvisorShares could see big inflows if it can
manage to generate stronger yields than the other choices. Though
the cost of the product is bit expensive, it is probably far less
than the 'traditional' hedge funds. However, active management and
need to understand the fund's insight might restrict volume levels
at the initial stage, suggesting wide bid ask spreads.
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ISHARS-IBX HYCB (HYG): ETF Research Reports
PERITUS-HIGH YL (HYLD): ETF Research Reports
FT-TAC HI YLD (HYLS): ETF Research Reports
SPDR-BC HY BD (JNK): ETF Research Reports
PWRSH-PFD PORT (PGX): ETF Research Reports
VANGD-IT CRP BD (VCIT): ETF Research Reports
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