At the height of the Federal Reserve’s quantitative easing spectacle and when little thought was given to rising Treasury yields, income investors were smitten by multi-asset exchange traded funds.
Under one wrapper, dividend seekers could almost have it all with multi-asset ETFs like the Guggenheim Multi-Asset Income Index ETF (NYSEArca: CVY) – common stocks, master limited partnerships (MLPs), closed end funds, real estate investment trusts (REITS), preferred stocks and more. However, it was that diversity in asset classes that weighed on some multi-asset ETFs last year as Treasury yields soared. [Multi-Asset ETFs With Juicy Yields]
CVY gained 19.5%, but that lagged the S&P 500 by almost 1,300 basis points. The First Trust NASDAQ Multi-Asset Diversified Income Index Fund (NasdaqGS: MDIV) added 10.7% while the iShares Morningstar Multi-Asset Income ETF (NYSEArca: IYLD) barely closed higher on the year. As Treasury yields have fallen this year, multi-asset ETFs have found some relief. IYLD and MDIV are both positive on the year while CVY has been less bad than the S&P 500.
The differences between the three funds remind investors that just because ETFs have some of the same words in their names does not mean the funds themselves are the same. [Important Nuances Among Some ETFs]
For example, CVY trounced its rivals last year because its lineup is home to a large amount of U.S. common stocks than its rivals. CVY is home to 150 holdings, none of which account for more than 1.4% of the fund’s weight. Over half of those holdings are either U.S. common stocks or American depositary receipts. That worked last year as REITs and preferreds were punished by rising rates.