Exchange traded funds focused on junk bonds have garnered decent returns and new cash flow as investors show interest in high-yield investments. The current low interest rate environment and high market volatility has given this segment of the market more attention.
“We are seeing pretty significant interest in high-yield,” said Matthew Tucker, head of fixed income strategy at iShares, who in a recent reports adds that the firm’s junk bond ETF is its fastest growing fixed income product. “We have seen a lot of investors get comfortable with ETFs through equities and then look at their portfolio and think about how to incorporate them elsewhere.”
Junk bond ETFs have shown a 68% growth rate over the past year, and added 244% over the past three years, reports Nicole Bullock for the Financial Times. So far in 2012, a record inflow of $1 billion has been garnered in one week, according to Lipper data. [Junk Bond ETFs Still Say Risk-On]
Investors are seeking the highest-yielding investments they can, giving more attention to the junk bond section of the market. Since the Federal Reserve has announced it is keeping interest rates near zero until 2014, cash investments have lost their allure.
Junk bond ETFs have extra appeal because they feature low expense ratios, are able to trade quickly at anytime of the day and give instant diversification. [High Yield Bond ETFs See Record Inflow]