A number of ETF issuers have launched new products lately,
bringing the total number of funds just over the 1,500 mark. While
a few of these funds have been targeting brand new niches, there
has also been a rising trend of 'getting back to basics' for
issuers, as many have looked to round out lineups and plug up any
High Yield ETFs in Focus
At this time, Guggenheim, one of the industry veterans, has
launched 2 high yield corporate bond ETFs. This came at a time when
investors were seeking high yields from the bond markets. While
Guggenheim already has an array of ETFs which track specific
maturities, these ETFs are more target based (Read
Guggenheim Files for ASEAN ETF
The recent launches include
Guggenheim BulletShares 2019 High Yield Corporate Bond ETF
Guggenheim BulletShares 2020 High Yield Corporate Bond ETF
Both these ETFs are designed to track the performance of the high
yield corner of the fixed income world while putting focus on
securities which have a fixed maturity date.
BSJJ seeks to track the performance of high yield corporate debt
notes which have an effective maturity in 2019. The fund took its
start with an AUM of $2.5 million.
BSJK tracks the performance of high yield corporate debt notes
maturing in 2020. Like BSJJ it also has an AUM of $2.5 million.
Both the products charge 42bps in fees and expenses.
Why These Might Be in Focus
In the latest FOMC meeting, Ben Bernanke put QE3 tapering on hold
until pronounced growth is seen in the economy. Instead, it lowered
the GDP growth outlook to 2%-2.3% from 2.3%-2.6% for this year,
citing concerns of tight fiscal policy and higher mortgage rates.
Time to Buy Treasury Bond ETFs?
Further, the Fed reiterated that interest rates would stay near
zero and would not be increased until the unemployment rate falls
below 6.5% and inflation exceeds their target.
This surprising move cheered the market and breathed life into the
depressed bond world. Investors have started to shift their focus
towards the debt ceiling, especially high yield bonds, as they are
poised to be upcoming opportunities for investors with a high yield
A Better Yield ETF? UBS Launches High Income
Why do these ETFs look appealing?
Both the products have a unique feature of held-to-maturity which
might interest investors who seek principal protection along with
high interest rate hike.
In fact, both these ETFs are low in terms of costs as their fees
are much lower than most of the other contenders in the space. The
average expense ratio in the high yield bond category stands at
56bps. (Find all
High Yield/Junk Bonds
Tough Contenders in the Space
While there are already about 30 ETFs in the High Yield ETF space,
the product may face a tough match-up from these deep rooted funds
in the category:
iShares iBoxx High Yield Corporate Bond Fund (
State Street SPDR Barclays Capital High Yield Bond ETF
and PowerShares Senior Loan Portfolio (
Given this, it may be difficult for these new BulletShares funds to
accumulate assets in light of this competition. However, many other
BulletShares funds have seen solid inflows, so there is definitely
some hope for these new products as well.
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