High-Yield Bonds: Active ETF Bucks Outflow Trend

July 3rd at 3:25pm by Paul Weisbruch, Street One Financial

An actively managed ETF that we have featured from time to time in this column, HYLD (Peritus High Yield, Expense Ratio 1.35%) has bucked the 2013 trend of net outflows in the High Yield Fixed Income space, adding more than $82 million to the fund thus far this year via creation activity.

The two largest funds in the HY Fixed Income space HYG (iShares $ High Yield Corporate Bond, Expense Ratio 0.50%) and JNK (SPDR Barclays Capital High Yield Bond, Expense Ratio 0.40%) have lost $1.78 billion and $2.98 billion respectively year to date in terms of net redemption flows, as nervous investors have staggered out of high yield corporate bonds (not only in the U.S. but also in overseas based issues) in the recent shake-out in the space.

In fact, some analysts have advocated more of an “active” approach in fixed income at this point in time given the unprecedented situation with Bernanke and the Fed’s QE programs and the dislocation it caused throughout June in bond markets, and it seems to have given some traction to actively managed fixed income products such as HYLD for instance. [High-Yield Bond ETF Takes Active Approach]

HYLD currently has a yield of 8.19% compared to the 6.64% yield of JNK and 6.51% yield of HYG. HYLD has grown steadily since its inception back in late 2010, gathering a total of $260 million currently in assets under management and with twenty eight ETFs in the category currently, only fifteen of these funds, HYLD included, have over $100 million in assets under management today.

As one would expect given the actively managed mandate of the fund, holdings vary from time to time in HYLD, with the fund currently weighted to the following issues at the top end of the portfolio: NII Capital Corp. (2.16%), Molycorp Inc. (2.12%), CNG Holdings (2.05%), Cincinnati Bell Inc. (2.04%), and Earthlink Inc. (2.03%).

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.

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