The introduction of junk bond ETFs such as iShares iBoxx High Yield Fund (NYSEArca: HYG) has brought liquidity, transparency and access to a market that was previously inaccessible to many investors, says money manager BlackRock.
HYG and other funds have “effectively changed how investors look at and invest in the high yield market, giving them an intra-day indicator of what the high yield market is doing,” says Matt Tucker, head of fixed-income investment strategy at iShares.
The BlackRock-managed fund is the largest high-yield ETF with $14.2 billion in assets, followed by others such as SPDR Barclays High Yield Bond (NYSEArca: JNK), PowerShares High Yield Corporate (NYSEArca: PHB) and PIMCO 0-5 Year High Yield Corporate Bond (NYSEArca: HYS).
ETFs that invest in high-yield corporate bonds have been a favorite among income-hungry investors. Junk bond mutual funds and ETFs saw their first outflow in 19 weeks. [Investors Cool on High-Yield Bond ETFs]
HYG is the oldest ETF in the category with a five-year track record.
Tucker said although HYG faced questions about its liquidity when it launched in 2007, the fund has actually became a source of liquidity that hadn’t existed before.