Squeezed by low interest rates on money market funds and U.S. Treasurys, investors have cast wider and wider nets over the past few years in search of yield. The yield hunt has predictably included common stocks, but investors have warmed to other asset classes with even more robust yields such as MLPs, REITS and junk bonds.
Investors that want exposure to those asset classes and others do not need to spread their accounts over multiple holdings. These days, generating income from multiple asset classes has been made easier by ETF issuers. Noticing the demand for new higher-yielding income products (and an opportunity to profit from that demand), ETF sponsors have steadily increased the number of mutli-asset income funds available to investors. [Mutli-Asset ETFs for Income]
Lipper says roughly 100 funds using multiple assets and generating income have launched since the beginning of 2010, attracting $26 billion in assets. In all, so-called multi-asset funds now hold nearly $460 billion in assets, reports Reshkma Kapadia for Barron’s.
Among ETFs, the dominate multi-asset product is the Guggenheim Multi-Asset Income ETF (NYSEArca: CVY). CVY, which has a 30-day SEC yield of 6%, is nearly seven years old and has over $1 billion in assets under management. CVY holds both domestic and international common stocks, American depositary receipts paying dividends, real estate investment trusts, master limited partnerships, closed-end funds, Canadian royalty trusts and traditional preferred stocks. [Mutli-Asset ETFs Yield Over 5%]
Investors looking for alternatives to CVY need not look far.
Guggenheim International Multi-Asset Income ETF (NYSEArca: HGI)
The Guggenheim International Multi-Asset Income ETF is the international equivalent of CVY, though this is not a pure “ex-U.S.” fund as U.S. the is HGI’s second-largest country weight at 15.2%. The U.K. is HGI’s largest country exposure at nearly 19.2% and the top-five country weights are rounded out by Japan, Hong Kong and Germany.
The six-year old HGI has almost $109 million in assets under management, but is down 5% year-to-date, indicating a combined 17.4% weight to Hong Kong, Brazil, Australia and China has hampered the fund’s performance.
Financials, energy and telecom combine for over 52% of HGI’s sector weight. HGI tracks the Zacks International Multi-Asset Income Index, which is comprised of 150 stocks selected, based on investment and other criteria, from a universe of international companies, global REITs, master limited partnerships, Canadian royalty trusts, ADRs, emerging markets equities and U.S. listed closed-end funds that invest in international companies, according to Guggenheim.
HGI is currently home to 155 stocks and the ETF has a lower standard deviation at 18.52% than the MSCI EAFE Index at 19.35%.
HGI has a 30-day SEC yield of 5.54%.
First Trust NASDAQ Multi-Asset Diversified Income Index Fund (NasdaqGS: MDIV)
The First Trust NASDAQ Multi-Asset Diversified Income Index Fund is one of the newer members of the multi-asset ETF fray having debuted last August. Highlighting investors’ thirst for yield, MDIV has attracted over $463 million in asset in less than a year of trading.
MDIV allocates 25.7% to dividend stocks, 20.8% to MLPs and almost 20% to preferred stocks. REITs and junk bonds make up the rest of the fund. In fact, MDIV’s largest holding is another ETF, the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG), which represents 14.6% of MDIV’s weight. No other holding receives a weight of more than 1.43%. [Off the Beaten Path Yield ETFs]
MDIV is up nearly 4% since its debut and has a 30-day SEC yield of 6.1%.
First Trust NASDAQ Multi-Asset Diversified Income Index Fund
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of CVY and HYG