On a day when U.S. equities are soaring, bonds may not be the
first thing on many investors' minds. Even with that in mind, it
is worth noting that some newer bond
have rapidly accumulated assets under management, even as stocks
Typically, a "new" ETF is
a year old or less
, but in a new research note, S&P Capital IQ looks at a broad
swath of successful bond ETFs that have come to market over the
past three years.
"Indeed, 41 of the 181 fixed income ETFs for which we have
such data have over $1 billion in assets, helped by the strong
demand in 2012 for income-generating ideas," said S&P Capital
IQ in the note. "In 2012 alone, fixed income ETFs received
approximately $53 billion in new money and these products now
have nearly $250 billion in assets."
The research firm notes that there are seven bond ETFs that
debuted over the past three years that currently have at least $1
billion in AUM. S&P sees that resulting from three factors:
Who is the asset manager and index provider behind the product?
The ETF's costs and does the ETF help to fill a need for
investors better than alternatives?
The PIMCO Total Return ETF (NYSE:
) stands as an obvious example of newer bond ETF that delivers on
at least two of those factors for investors. BOND has the
advantage of being known as the "Bill Gross ETF" or the ETF
equivalent of the massive PIMCO Total Return Fund, the world's
largest mutual fund.
Not even 14 months old, BOND has accumulated more than $5
billion in AUM and its expense ratio of
0.55 percent is fair among actively managed
. Many analysts and members of the press have doted over BOND,
anointing it as the savior of the actively managed ETF space. To
be sure, BOND has delivered the goods in terms of AUM, returns
and low-cost access to Bill Gross.
However, all the fawning over bond obfuscates the fact that
some other noteworthy actively managed ETFs on
the market today
Chief among them is the WisdomTree Emerging Markets Local Debt
), which was also highlighted in the S&P note. Something that
folks often forget about the WisdomTree Emerging Markets Local
Debt Fund is that this was the first actively managed ETF to
surpass $1 billion in AUM. Today, ELD has over $1.9 billion in
assets. With an expense ratio of 0.55 percent and an effective
duration of 4.83 years, ELD has gained prominence as investors
have looked for ways to get exposure to
strong government balance sheets in the emerging
ELD's country weights include Brazil, Chile, Colombia, Mexico,
Peru, Poland, Turkey, South Africa, Russia, Malaysia, Indonesia,
Philippines, Thailand, China and South Korea.
Flying under the radar is the FlexShares iBoxx 3-Year Target
Duration TIPS Index Fund (NYSE:
), which charges just 0.2 percent per year. TDTT debuted in
September 2011 and has already hauled in over $1.5 billion in
assets. TDTT "gives investors access to the inflation-hedging
qualities of TIPS and seeks to provide targeted duration exposure
through changing interest rate and economic cycles,"
according to FlexShares
Another ETF that S&P mentioned that also debuted in 2011
is the iShares Floating Rate Note Fund (NYSE:
). FLOT also charges 0.2 percent and has also amassed over $1.5
billion in assets.
Investors looking for shorter duration high-yield corporate
have at least two options
that S&P mentioned. The PIMCO 0-5 Year High Yield Corporate
Bond Index (NYSE:
), which will turn two in June, has a juicy distribution yield of
4.87 percent and an effective duration of 1.85 years. HYS charges
0.55 percent and has more than $1.9 billion in assets.
HYS has a rival in the form of the SPDR Barclays Short Term
High Yield Bond ETF (NYSE:
). Barely more than a year old, SJNK dispels the notion that
investors have been pulling money out of high-yield bonds as the
ETF has hauled in $1.2 billion in assets. SJNK has a modified
adjusted duration of 2.06 years and fees of 0.4 percent.
S&P also noted the PowerShares Senior Loan Portfolio
), which debuted in March 2011 as the first senior loan ETF.
BKLN's success has triggered the introduction of at least two
copycat ETFs. With a distribution yield of 4.56 percent, BKLN's
yield to maturity of 5.58 percent. The ETF is the top
asset-gatherer in the PowerShares lineup this year, having pulled
in $1.88 billion in new cash,
according to issuer data
. BKLN now has over $3.4 billion in assets.
For more on ETFs, click
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