Dutram suggests that investors should not write off HYLD as a high-yield option, even with its slightly higher expenses.
In comparison, the iShares High Yield Corporate Bond ETF (NYSEArca: HYG) has a 3.89 year effective duration, 4.87% 30-day SEC yield and a 0.50% expense ratio. The fund is much larger, with $15.5 billion in assets under management and an average trading volume of 3.3 million shares.
On a performance basis, HYG has gained 2.3% year-to-date, compared to the 4.6% rise in HYLD, which suggests that the active management component in HYLD has brought value and capital appreciation.
ETFs tracking floating rate notes and senior bank loans have been popular recently as some investors position for higher interest rates. [Floating Rate ETFs]
However, speculation of a “Great Rotation” out of bonds has been off the mark. Treasury yields have actually been in rally mode with the 10-year yield falling below 1.8%. [PIMCO ETF Hits Lifetime High]
For more information on high-yield debt, visit our high-yield bonds category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own HYG.