ETF Spotlight on PowerShares Fundamental High-Yield Corporate Bond Portfolio Fund (NYSEArca: PHB), part of an ongoing series.
Assets: $878.8 million.
Objective: The PowerShares Fundamental High Yield Corporate Bond Fund tries to reflect the performance of the RAFI high Yield Bond Index, which uses a Fundamental Index methdology that selects corporate bonds based on their fundamental size, including sales, cash flow, dividends and book value of assets.
Holdings: Top holdings include: Weyerhaeuser Co. 1.4%, Sears Holding Corp. 1.4%, Intl Leas Finance Corp 1.4%, Intl Lease Finance Corp AIG 1.3% and Supervalu Inc 1.2%.
What You Should Know:
- Invesco PowerShares sponsors the fund.
- PHB has an expense ratio of 0.50%.
- Sector allocations include: basic materials 8.7%, communications 9.7%, consumer cyclical 18.7%, consumer non-cyclical 15.1%, diversified 0.3%, energy 14.4%, financial 12.2%, health care 0.9%, industrial 5.1%, technology 2.92%, utilities 3.6% and unclassified 8.4%.
- The ETF has a weighted average coupon rate of 7.51% with an average 6.17 years to maturity.
- Credit quality allocations include: BBB 13%, BB 58% and B 29%; Baa 6%, Ba 55% and B 39%.
- The fund has a 12-month yield of 5.61%.
- PHB is up 0.6% over the past month, up 4.9% over the past three months and up 7.0% over the past year.
- The ETF is 2.5% above its 200-day exponential moving average.
The Latest News:
- Average yields on high-yield corporate debt fell below 7% in the week ended March 2 but closed at 7.02% last Friday, reports Patrick McGee for The Wall Street Journal.
- Companies are using this opportunity to refinance at the lower rates and push back the maturity date, John Corkinos, head of leveraged-finance capital markets at Bank of America Merrill Lynch, said.
- High-yield issuance reached $73 billion as of last Friday globally, or $8 billion more than last year. [Bond ETF Assets Rise Nearly 40% in a Year]
- “You’ll get higher income potential than with traditional fixed income and more downside protection than you would by owning stocks in this environment,” James E. Keenan, head of leveraged finance at BlackRock. [High-Yield ETFs for Investors Seeking Income]
- Considering current low rates, “safer” assets are “more exposed to price loss when interest rates do eventually rise,” Keenan added. “With yields as high as they are and default rates low, we believe [junk-bond] investors are well compensated for current risk.”
PowerShares Fundamental High-Yield Corporate Bond Portfolio
For past stories in this series, visit our ETF Spotlight category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.