The AdvisorShares Peritus High Yield ETF (NYSEArca: HYLD) brought home a nice feather in the cap of the actively managed ETF space, claiming the prestigious five-star rating from Morningstar.
Morningstar’s five-star rating applies to both HYLD’s three-year and overall risk-adjusted performances. HYLD, which is just over three years old, is one of the most successful actively managed ETFs with $472.3 million in assets under management as of Jan. 7, according to AdvisorShares data.
Earning the five-star rating means HYLD was in the top 10% of high yield bond ETFs and mutual funds. The ETF is managed by California-based Peritus Asset Management, which specializes in unearthing opportunities in the high yield corporate and loan markets.
Not only is HYLD’s 30-day SEC yield of 8.24% fatter than many of its passively managed rivals, but the ETF’s duration of about 2.9 years is also lower, indicating the fund has diminished interest rate risk relative to other junk bond ETFs, an asset where credit, not rate risk is usually investors’ primary concern. HYLD’s duration is nearly a full year lower than that of the Barclay’s U.S. High Yield Index. [10 Bond ETFs With Yields Above 5%]
Over three-quarters of the fund’s weight is rated B+, B or B-. No issue accounts for more than 1.71% of HYLD’s weight and at the sector level, oil and gas, telecom and mining and coal combine for a third of the fund’s weight.
Over the past three years, HYLD is up nearly 32%. Last year, the fund brought in almost $276 million of its current AUM total.
As of late December, U.S. junk bond issuance in 2013 was $324 billion, just below the record $344 billion seen in 2012. HYLD was able to navigate what was a generally good but sometimes trying year for high yield bond ETFs with a 2013 gain of almost 12%, more than double the gains posted by the two largest U.S. junk bond ETFs. [Junk Bond Issuance Flirts With Record]
“HYLD seeks to generate a high, tangible current income provided primarily by non-investment grade corporate debt securities with a secondary goal of capital appreciation. With valuation and fundamental analysis an essential component of their strategy, Peritus’ portfolio management team takes an active credit approach and concentrates only on the securities they feel offer the best value with the least risk within the company’s entire capital structure,” according to a statement issued by AdvisorShares.