Even with fears of a bond bubble and soaring equity prices,
many investors continue to embrace bond
for their portfolio. However, not just any bond ETF will do
anymore, as the focus has been on short-term securities and those
in the high yield space.
Funds with a tilt towards these characteristics have been
extremely popular, with several-such as
-adding more than $1.6 billion in AUM in the year-to-date period.
Yet despite the popularity of the asset class, some of the best
performing funds in the fixed income world have seen next to
nothing in inflows during the time frame.
This trend is particularly the case with the
Peritus High Yield ETF (
. This fund has only amassed a paltry $28 million in AUM so far
in 2013, putting it far below the aforementioned top asset
average for the fixed income
world as well. While HYLD is a bit pricey, the fund has
proven itself so far in 2013, adding 4.55% YTD (read
The Comprehensive Guide to Junk Bond ETF
Although this may not sound like a lot, it is actually close
to 65 basis points higher than the next closest fund-
-and about 160 basis points higher than the 2
place high yield product (
). This suggests that the Peritus High Yield ETF has been earning
its keep, and could be worth a closer look by fixed income ETF
investors who a seeking an outperforming option in the space.
HYLD is an active ETF that focuses on the junk segment of the
bond market. Its managers look to take a value-based approach,
investing primarily in secondary market bonds, seeking to provide
investors with a high current income level as well as capital
In addition to its price outperformance, the fund has
connected on the income front as well, as the product has a
30-Day SEC yield of 8.27%. This is despite the fact that HYLD has
a duration that is about three-fourths of a year less (coming in
at 3.24 years) than the Barclays U.S. High Yield Index.
These factors mean that the ETF is right in the
wheelhouse for many investors in terms of both duration and
yield. This suggests that credit risk will be the primary worry
of this fund and that interest rate risk will not be much of an
issue, something that many have grown to appreciate over the past
few months and years (See
3 Actively Managed Bond ETFs for Stability and
However, investors should note that the product is a bit
pricey, and that the active management does come with a cost.
Total fees come in at 1.35%, with a 1.1% management fee and a 25
basis point 'other expense'.
It is also worth pointing out that AUM is at about $200
million with volume at roughly 50,000 shares a day. This could
increase total costs in the form of bid ask spreads, but observed
levels of the spread have been very tight, so this shouldn't be
much of a concern.
In terms of the bonds in the ETF's portfolio, the focus in on
those rated between B+ and B- by S&P. These account for 75%
of the total holdings with the remaining quarter rounded out by
bonds that are rated BB- (7%) or CCC+ and below (18%).
For individual securities, the portfolio is extremely well
spread out, as no single bond accounts for more than 2.5% of
assets. Sectors are also well diversified, but there is a bit of
a focus on health care, as two of these segments combine to
account for 17% of the total (see
Guide to 10 Great ETFs Yielding 7% or More
HYLD is what many fixed income ETF investors have been looking
for in 2013. It has a low duration and a huge yield, while it
also outperformed similar bond ETFs over long time periods.
While it is a lot pricier than its competitors, its active
management strategies have proven to be worth the extra cost by a
pretty healthy margin. So if you are still in the market for a
fixed income ETF, don't overlook this outperforming-- and high
yielding-- fund from AdvisorShares.
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MKT VEC-FA HYB (ANGL): ETF Research Reports
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