A favorite destination for yield-starved investors in 2012 has
been high-yield bond ETFs, but cash has flowed to junk bond funds
and yields have been suppressed. Relatively low yields on junk
bond ETFs have prompted speculation that
chasing price appreciation at these levels
could be hazardous to a portfolio's health.
If the performance of marquee junk bond ETFs over the past
month, there might be something to the argument that these funds
are showing their age. The iShares iBoxx $ High Yield Corporate
Bond Fund (NYSE:
), the largest high-yield bond ETF, is off 0.22 percent in the
past month. The SPDR Barclays Capital High Yield Bond (NYSE:
), the second-largest junk bond ETF, is up just two tenths of a
percent over the same period of time.
Home to a combined $29.3 billion in assets under management,
it is understandable that
HYG and JNK dominate junk bond ETF headlines
. However, those funds are not the entire story in this asset
class and at least one high-yield bond ETF has been standing tall
in recent weeks.
Over the past month, the PowerShares Senior Loan Portfolio
) is up 0.2 percent. That doesn't sound like much, but it appears
so when compared to what HYG and JNK have done over the same
Beyond performance, BKLN boasts an impressive run of inflows.
Simply put, those that think junk bond ETF inflows are dwindling
or are only heading to HYG and JNK are wrong. BKLN had $583
million in million in AUM as of early July, but
that number jumped to $880 million by September
BKLN's AUM number has continued to grow. As of the market
close on October 8, the fund crossed the $1 billion in AUM mark,
according to PowerShares data
. Said differently, in 10 trading days, BKLN has increased its
AUM total by almost 14 percent.
BKLN's rapid asset growth is impressive as is a quick run to
the $1 billion in assets mark. The fund, the first of its kind,
will not celebrate its second anniversary until March 2013.
Despite its youth, BKLN's success is easy to understand.
For starters, the fund is appealing to both professional and
retail investors. Some
experts have said
trading desks have begun using BKLN in place of credit default
swaps because its underlying paper is regularly traded. Retail
investors prize BKLN for a 30-day SEC yield of almost 4.4 percent
a monthly dividend.
Those reasons might just explain why BKLN has outperformed HYG
and JNK over the past six months.
For more on high-yield bond ETFs, click
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