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iShares launched a new fixed income fund focused on providing exposure to the high-yield space.
iShares Broad USD High Yield Corporate Bond ETF (USHY - Free Report) tracks the BofA Merrill Lynch U.S. High Yield Constrained Index and holds a portfolio of bonds that primarily target the short to intermediate end of the yield curve.
Fund Characteristics
The fund’s index seeks to measure the performance of U.S. dollar denominated high yield maturity targeted bonds in the corporate bond space. It has AUM of $50.0 million and has a moderate expense ratio of 22 basis points a year. It holds 730 junk bonds in its portfolio. The fund bears less concentration risk as just 12.8% is allocated to the top 10 holdings.
From a sector look, Communications, Energy and Consumer cyclical are the top three allocations of this fund, with 20.1%, 13.4% and 13.1% exposure, respectively (as of Nov 1, 2017).
From a credit rating perspective, the fund has 41.3% exposure to BB rated bonds, 37.4% to B rated bonds, 13.2% to CCC rated bonds, 1.0% to BBB rated bonds, 0.9% to CC rates bonds and 6.4% to Cash. Therefore, due to its high yield focus, the fund bears default risk. However, it seeks to invest in the higher end of the junk bond space.
Moreover, the fund targets the intermediate end of the yield curve, as it has an effective duration of 3.84 years and a weighted average maturity of 4.75 years. Therefore, the fund bears interest rate risk.
Per latest news reports, President Donald Trump announced Federal Reserve Governor Jerome Powell to replace Janet Yellen as the Fed chair when her term expires in February 2018. The markets widely anticipated this move and expect stability as Powell is seen as a dovish lead who will not steer much from current policy.
"He's strong, he's committed and he's smart, and if he is confirmed by the Senate, Jay will put his considerable talents and experience to work leading our nation's independent central bank" Trump said.
Competition
The fund faces a lot of competition from other high yield funds in the space. Below we discuss a few ETFs that seek to provide exposure to the high-yield space (see all High-Yield/Junk Bond ETFs here).
SPDR Bloomberg Barclays High Yield Bond ETF (JNK - Free Report)
This fund has AUM of $13.1 billion and seeks to provide exposure to high-yield bonds. It charges 40 basis points as fees per year and holds 972 junk bonds in its portfolio. From a sector look, Industrial, Finance and Utility are the top three allocations of this fund, with 87.6%, 9.2% and 3.0% exposure, respectively (as of Nov 1, 2017). The fund targets the short-to-intermediate end of the yield curve as it has an average maturity of 6.24 years and option adjusted duration of 3.62 years. The fund has returned 1.6% year to date and 1.8% in a year (as of Nov 2, 2017).
PowerShares Fundamental High Yield Corporate Bond Portfolio (PHB - Free Report)
This fund has AUM of $1.2 billion and seeks to provide exposure to high-yield bonds. It charges 50 basis points as fees per year and holds 258 junk bonds in its portfolio. From a sector look, Consumer Discretionary Energy and Industrials are the top three allocations of this fund, with 24.5%, 15.6% and 10.7% exposure, respectively (as of Nov 1, 2017). The fund targets the short to intermediate end of the yield curve as it has a weighted average maturity of 5.65 years and an effective duration of 3.53 years. The fund has returned 1.4% year to date and 1.6% in a year (as of Nov 2, 2017).
PIMCO 0-5 Year High Yield Corporate Bond Index Fund (HYS - Free Report)
This fund has AUM of $1.8 billion and seeks to provide exposure to high-yield bonds. It charges 55 basis points as fees per year and holds 416 junk bonds in its portfolio. From a sector look, High Yield Credit, U.S. Government-Related and Investment Grade Credit are the top three allocations of this fund, with 95.7%, 3.3% and 2.3% exposure, respectively (as of Sep 30, 2017). The fund targets the short end of the yield curve as it has a weighted average maturity of 3.05 years and an effective duration of 1.84 years. The fund has returned 1.1% year to date and 2.2% in a year (as of Nov 2, 2017).
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iShares Launches High Yield Bond ETF
iShares launched a new fixed income fund focused on providing exposure to the high-yield space.
iShares Broad USD High Yield Corporate Bond ETF (USHY - Free Report) tracks the BofA Merrill Lynch U.S. High Yield Constrained Index and holds a portfolio of bonds that primarily target the short to intermediate end of the yield curve.
Fund Characteristics
The fund’s index seeks to measure the performance of U.S. dollar denominated high yield maturity targeted bonds in the corporate bond space. It has AUM of $50.0 million and has a moderate expense ratio of 22 basis points a year. It holds 730 junk bonds in its portfolio. The fund bears less concentration risk as just 12.8% is allocated to the top 10 holdings.
From a sector look, Communications, Energy and Consumer cyclical are the top three allocations of this fund, with 20.1%, 13.4% and 13.1% exposure, respectively (as of Nov 1, 2017).
From a credit rating perspective, the fund has 41.3% exposure to BB rated bonds, 37.4% to B rated bonds, 13.2% to CCC rated bonds, 1.0% to BBB rated bonds, 0.9% to CC rates bonds and 6.4% to Cash. Therefore, due to its high yield focus, the fund bears default risk. However, it seeks to invest in the higher end of the junk bond space.
Moreover, the fund targets the intermediate end of the yield curve, as it has an effective duration of 3.84 years and a weighted average maturity of 4.75 years. Therefore, the fund bears interest rate risk.
Per latest news reports, President Donald Trump announced Federal Reserve Governor Jerome Powell to replace Janet Yellen as the Fed chair when her term expires in February 2018. The markets widely anticipated this move and expect stability as Powell is seen as a dovish lead who will not steer much from current policy.
"He's strong, he's committed and he's smart, and if he is confirmed by the Senate, Jay will put his considerable talents and experience to work leading our nation's independent central bank" Trump said.
Competition
The fund faces a lot of competition from other high yield funds in the space. Below we discuss a few ETFs that seek to provide exposure to the high-yield space (see all High-Yield/Junk Bond ETFs here).
SPDR Bloomberg Barclays High Yield Bond ETF (JNK - Free Report)
This fund has AUM of $13.1 billion and seeks to provide exposure to high-yield bonds. It charges 40 basis points as fees per year and holds 972 junk bonds in its portfolio. From a sector look, Industrial, Finance and Utility are the top three allocations of this fund, with 87.6%, 9.2% and 3.0% exposure, respectively (as of Nov 1, 2017). The fund targets the short-to-intermediate end of the yield curve as it has an average maturity of 6.24 years and option adjusted duration of 3.62 years. The fund has returned 1.6% year to date and 1.8% in a year (as of Nov 2, 2017).
PowerShares Fundamental High Yield Corporate Bond Portfolio (PHB - Free Report)
This fund has AUM of $1.2 billion and seeks to provide exposure to high-yield bonds. It charges 50 basis points as fees per year and holds 258 junk bonds in its portfolio. From a sector look, Consumer Discretionary Energy and Industrials are the top three allocations of this fund, with 24.5%, 15.6% and 10.7% exposure, respectively (as of Nov 1, 2017). The fund targets the short to intermediate end of the yield curve as it has a weighted average maturity of 5.65 years and an effective duration of 3.53 years. The fund has returned 1.4% year to date and 1.6% in a year (as of Nov 2, 2017).
PIMCO 0-5 Year High Yield Corporate Bond Index Fund (HYS - Free Report)
This fund has AUM of $1.8 billion and seeks to provide exposure to high-yield bonds. It charges 55 basis points as fees per year and holds 416 junk bonds in its portfolio. From a sector look, High Yield Credit, U.S. Government-Related and Investment Grade Credit are the top three allocations of this fund, with 95.7%, 3.3% and 2.3% exposure, respectively (as of Sep 30, 2017). The fund targets the short end of the yield curve as it has a weighted average maturity of 3.05 years and an effective duration of 1.84 years. The fund has returned 1.1% year to date and 2.2% in a year (as of Nov 2, 2017).
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 >>