We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
High-Yield Bond ETF Space Slowly Turning Defensive
Read MoreHide Full Article
There has been constant innovation in fixed income ETF launches over the last few months. The tactics of plain-vanilla bond ETFs do not seem to be in fashion anymore and issuers are focusing increasingly on active and smart-beta bond ETFs (read: Behind Rise of Smart Beta Bond ETFs).
Within the smart-beta spectrum, issuers are lately trying to eye low-beta or low volatile or defensive high-yield bond ETFs. Let’s find out why (read: 6 Best Bond ETFs of 2016 -- High Yield Tops).
Inside New Filings and Launches
Deutsche Asset Management lately filed a product – Deutsche X-trackers Low Beta High Yield Bond ETF. The fund will track the Solactive USD High Yield Corporates [Low Beta] Index. The Underlying Index looks to measure the performance of the U.S. dollar-denominated high yield corporate bond market that shows lower overall beta to the broader high yield corporate fixed income market, as per the prospectus.
If a security’s yield is lower than that of its sector’s median yield, it will likely get an entry into the index as lower yielding bonds normally have lower beta.
Then there is IQ S&P High Yield Low Volatility Bond ETF . The fund looks to track the performance of the S&P U.S. High Yield Low Volatility Corporate Bond Index. The fund hit the market in mid-February this year and has amassed about $95.8 million in assets. It charges 40 bps in fees. The 30-Day SEC Yield for the 30-day period ended 3/31/17 was 3.65% for the fund. Consumer Discretionary was the top sector of the fund.
There is yet another fund —iShares Edge High Yield Defensive Bond ETF (HYDB - Free Report) .The productlooks to track an index that offers greater risk adjusted and total returns, relative to the broader high yield corporate bond market. This bond ETF also aims to lower risks of the high-yield space by targeting two factors — quality and value, as per the issuer.
The fund came into the market on July 11, 2017 and has amassed about $10 million in assets. The 30-day SEC Yield as of August 14, 2017 was 5.46%. It charges 35 bps in fees. Consumer Staples, Energy, Communications, Basic Industry, Consumer Cyclical and Technology get a double-digit weight in the fund (see all High-Yield/Junk Bond ETFs here).
Why Issuers Turn to Low Beta High Yield Bond ETFs
In a still-low rate environment especially in the developed economies, high-yield bond ETFs could provide investors with income potential. However, since most of the high-yield bonds are below investment grade, these carry higher default risks. So, a look at the low risk quotient along with a higher income opportunity is a good idea in the current investing landscape.
Since lower beta means that the security is less sensitive to broader market movements, the newly-filed ETF should help investors cut down on risk and volatility associated with high yield bonds.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
High-Yield Bond ETF Space Slowly Turning Defensive
There has been constant innovation in fixed income ETF launches over the last few months. The tactics of plain-vanilla bond ETFs do not seem to be in fashion anymore and issuers are focusing increasingly on active and smart-beta bond ETFs (read: Behind Rise of Smart Beta Bond ETFs).
Within the smart-beta spectrum, issuers are lately trying to eye low-beta or low volatile or defensive high-yield bond ETFs. Let’s find out why (read: 6 Best Bond ETFs of 2016 -- High Yield Tops).
Inside New Filings and Launches
Deutsche Asset Management lately filed a product – Deutsche X-trackers Low Beta High Yield Bond ETF. The fund will track the Solactive USD High Yield Corporates [Low Beta] Index. The Underlying Index looks to measure the performance of the U.S. dollar-denominated high yield corporate bond market that shows lower overall beta to the broader high yield corporate fixed income market, as per the prospectus.
If a security’s yield is lower than that of its sector’s median yield, it will likely get an entry into the index as lower yielding bonds normally have lower beta.
Then there is IQ S&P High Yield Low Volatility Bond ETF . The fund looks to track the performance of the S&P U.S. High Yield Low Volatility Corporate Bond Index. The fund hit the market in mid-February this year and has amassed about $95.8 million in assets. It charges 40 bps in fees. The 30-Day SEC Yield for the 30-day period ended 3/31/17 was 3.65% for the fund. Consumer Discretionary was the top sector of the fund.
There is yet another fund —iShares Edge High Yield Defensive Bond ETF (HYDB - Free Report) .The productlooks to track an index that offers greater risk adjusted and total returns, relative to the broader high yield corporate bond market. This bond ETF also aims to lower risks of the high-yield space by targeting two factors — quality and value, as per the issuer.
The fund came into the market on July 11, 2017 and has amassed about $10 million in assets. The 30-day SEC Yield as of August 14, 2017 was 5.46%. It charges 35 bps in fees. Consumer Staples, Energy, Communications, Basic Industry, Consumer Cyclical and Technology get a double-digit weight in the fund (see all High-Yield/Junk Bond ETFs here).
Why Issuers Turn to Low Beta High Yield Bond ETFs
In a still-low rate environment especially in the developed economies, high-yield bond ETFs could provide investors with income potential. However, since most of the high-yield bonds are below investment grade, these carry higher default risks. So, a look at the low risk quotient along with a higher income opportunity is a good idea in the current investing landscape.
Since lower beta means that the security is less sensitive to broader market movements, the newly-filed ETF should help investors cut down on risk and volatility associated with high yield bonds.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>