Don’t Forget About These Multi-Asset ETFs for Income
May 23rd at 5:00pm by Tom Lydon
The current low interest rate, low yield environment has sent investors scurrying to an array of destinations in an effort to generate income.
Dividend stocks, high-yield bonds, MLPs and REITs remain popular choices for income-staved investors. ETFs that offer one-stop shopping for yield-starved investors, commonly known as multi-asset ETFs, are also becoming part of the income lexicon. [All In One ETFs With Attractive Yields]
Familiar names in the multi-asset ETF space include the space’s largest fund by assets, the Guggenheim Multi-Asset Income ETF (NYSEArca: CVY) and this year’s top asset-gatherer, the First Trust Multi-Asset Dividend Income Index Fund (NasdaqGM: MDIV). In a testament to the popularity of multi-asset ETFs, MDIV is just 10 months old and already has nearly $444 million in assets under management, according to First Trust data.
CVY and MDIV may get a lot of the press, but there are some other, actively managed multi-asset ETFs that merit consideration. For example, the SPDR SSgA Income Allocation ETF (NYSEArca: INKM) is a solid performer that has been flying under the radar. Up 4.6% year-to-date, INKM is 13 months old and has raked in nearly $168 million in assets.
INKM, which has a dividend yield of 3.8%, can be viewed as an ETF fund of funds because the bulk of its 22 holdings are other ETFs issued by State Street Global Advisors. Stocks and investment-grade corporate bonds combine for over 75% of INKM’s weight. [Multi-Asset ETFs For Yield And Stability]
“We’ve seen interest in INKM from taxable institutional pools of assets that want a steady stream of income with tax efficiency,” said Robert Trumbull, head of institutional ETF sales at State Street Global Advisors.
Another under-the-radar multi-asset play is the SPDR SSgA Multi-Asset Real Return ETF (NYSEArca: RLY), which shares the same debut date as INKM. In terms of returns, RLY has been a laggard this year with a 1.6% decline, but the $123.4 million ETF has perked up with a 3.1% gain in the past month.
Figuring out why RLY has lagged this year is not difficult. Like INKM, RLY uses an ETF fund of funds approach. RLY’s lineup includes allocations to downtrodden ETFs such as the Market Vectors Gold Miners ETF (NYSEArca: GDX) and the PowerShares DB Gold Fund (NYSEArca: DGL). Fortunately, those allocations are small, but RLY’s 45.6% weight to natural resources and 11.4% allocation to commodities funds makes the ETF a multi-asset play for the risk-tolerant investor.
The SPDR SSgA Global Allocation ETF (NYSEArca: GAL) is the smallest of the three ETFs mentioned here with $53.5 million in assets, but GAL is also the best performer on a year-to-date basis with a gain of 7%. GAL is also the cheapest of three with a 0.35% annual expense ratio. INKM and RLY both charge 0.7%.
GAL uses the ETF fund of funds approach as well with other SSgA ETFs dominating most of GAL’s 27 holdings. The fund offers something for investors looking for international exposure as it allocates more than a third of its weight to global stocks.
U.S. stocks also figure prominently in GAL’s mix with a weight of 28.4 percent, but the ETF does feature exposure to U.S. investment-grade and junk bonds as well as preferreds and slight exposure to emerging markets debt.
ETF Trends editorial team contributed to this story.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.