The number of investment options that bear the label "safe
haven" is shrinking amid Europe's worsening sovereign debt crisis
and other global macroeconomic headwinds. Even gold, historically
one of the premier safe haven options, has been tightly
correlated with the euro and has behaved like a risk asset for
much of 2012.
With cash instruments and U.S. Treasuries producing little in
the way of yield, investors would do well to consider investments
that are not quite, but
almost
safe havens, iShares' Global Chief Investment Strategist
Russ Koesterich said in a recent note
.
"Membership in the club of AAA-rated countries is rapidly
shrinking, and rising correlations mean that, at least in the
short term, virtually all risky assets are moving together,"
Koesterich said. "While there are still a few places to hide, I
believe the "safety" of the real safe-haven investments comes at
a cost."
Koesterich's "semi-safe" haven group includes some predictable
choices at the sector level, but these low-beta options have
proven sturdier than their high-beta counterparts in recent
weeks.
"As of Monday's close, the US market was down roughly 8% from
its peak. In contrast, at the same time, healthcare and consumer
staples were down roughly 4% and 2% respectively, while utilities
and telecom were posting new highs for 2012," he said in the
note.
Koesterich highlighted the iShares S&P Global
Telecommunications Sector Index Fund (NYSE:
IXP
) as a low-beta sector fund for investors to consider. IXP
devotes over 40% of its weight to just three stocks - AT&T
(NYSE:
T
), Vodafone (Nasdaq:
VOD
) and Verizon (NYSE:
VZ
). Overall, the $457 million ETF is home to 39 stocks and has a
trailing 12-month yield of 5.56%, nearly double the trailing
12-month yield on the more domestically-focused iShares Dow Jones
U.S. Telecommunications Sector Index Fund (NYSE:
IYZ
).
Koesterich highlighted dividend ETFs with his choices being
the iShares High Dividend Equity Fund (NYSE:
HDV
) and the iShares Emerging Markets Dividend Index Fund (NYSE:
DVYE
). HDV has only been trading for about 15 months, but has managed
to accumulate almost $1.6 billion in assets in that time. With an
expense ratio of 0.4%, HDV is home to 75 stocks. Top-10 holdings
include AT&T, Pfizer (NYSE:
PFE
) and Procter & Gamble (NYSE:
PG
).
DVYE, which
faces intense competition in the rapidly
expanding world of emerging markets dividend ETFs
charges 0.49% and has a 30-day SEC yield of 6.08%, according to
iShares data.
Investors looking for semi-safe haven fixed income options
should consider the iShares S&P National AMT-Free Municipal
Bond Fund (NYSE:
MUB
) and the iShares iBoxx $ Investment Grade Corporate Bond Fund
(NYSE:
LQD
), Koesterich said in the note. Both funds pay monthly dividends.
LQD has a trailing 12-month yield north of 4% and MUB's is above
3%.
"With Europe a lingering concern and the US fiscal cliff
unlikely to be resolved until after the election, I'm sympathetic
with investors' desire for safety. However, as traditional
safe-haven investments come with considerable costs, 'semi-safe
havens' may be the new place to hide," Koesterich said.
For more low-beta ETF ideas, click
here
.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.