When it comes to actively managed ETFs, much ado has been made
about the PIMCO Total Return ETF (NYSE:
BOND
). Colloquially known as the Bill Gross ETF, BOND has amassed
almost $1.8 billion in assets under management in just three full
months of trading, making it the largest actively managed
ETF.
It is hard to criticize BOND. With an expense ratio of 0.55
percent, it is inexpensive in relation to many other actively
managed funds. Obviously, it has been well-received among
investors and the fund has backed that up with a solid
performance.
Still, the mere existence of BOND
arguably distracts investors
from some other funds worthy of consideration in the actively
managed ETF space. One of those funds is the Peritus High Yield
ETF (NYSE:
HYLD
).
Not only does the Peritus High Yield ETF, which debuted in
late 2010, fly somewhat under the radar among actively managed
ETFs, but the fund
arguably goes unnoticed
among junk bond plays as well.
That is essentially what HYLD is - another ETF avenue for
investors to gain exposure to high-yield bonds. Sub-adviser
Peritus Asset Management, LLC "seeks to achieve the Fund's
objective by selecting a focused portfolio of high yield debt
securities that, via their coupons, generate a high current
income stream," according to the AdvisorShares web site.
Using a value-based approach to the high-yield credit markets,
Peritus typically eschews new issue participation in favor of the
secondary market due to less competition and better opportunities
for capital appreciation.
HYLD features a duration of 3.46 years, which is below the
durations of the iShares iBoxx $ High Yield Corporate Bond Fund
(NYSE:
HYG
) and the SPDR S&P Barclays Capital High Yield Bond ETF
(NYSE:
JNK
), the two largest junk bond ETFs. High-yield bonds typically
have shorter durations than long-dated Treasuries, making the
former less vulnerable to rising interest rates.
As has been duly noted plenty of times this year, high-yield
bond ETFs represent viable alternatives for yield-starved
investors that are willing to embrace a bit more risk. To the
point of income generation, HYLD does not disappoint. The fund
pays a monthly dividend
and has a 30-day SEC yield of 10.58 percent. That is more than
300 basis points above the 30-day SEC yields found on HYG and
JNK.
HYLD's holdings are splashed across an array of sectors with
health care leading the way at 20 percent of the fund's weight.
The ETF also features decent exposure to cyclical sectors such
auto makers and parts suppliers, chemicals producers and
transportation firms.
One knock on HYLD is its expense ratio of 1.36 percent - well
above what investors can find with passively managed high-yield
bond ETFs. Those fees do not indicate that HYLD is a "bad" ETF.
Based on income-generating potential and year-to-date returns,
HYLD is a solid pick for income investors. The high fee is the
cost of admission for active management and the jaw-dropping
yield.
For more on ETFs with high yields, click
here
.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.