New ETF Goes Deep in Search of Income

HIPS’ debut could prove to be well-timed. U.S.-listed MLP ETFs hold over $22 billion in combined assets, double the amount held just three years ago and with interest rates still low by historical standards, income investors have flocked to REIT ETFs as well. For example, the Vanguard REIT ETF (NYSEArca: VNQ) was one of the top 10 asset-gathering ETFs of any type last year.

REITs provide a liquid alternative to owning physical commercial real estate properties. REITs investments also share similar attributes with stocks and bonds. Since REITs are required to distribute at least 90% of their income from rent payments to investors, these real estate investments can generate attractive yields. [REIT ETFs Keep Looking Solid]

According to Wilshire Associates, BDCs have an average yield of over 10%, compared to 3.8% for real estate investment trusts and utilities or the 2% for the S&P 500 index, writes Jeff Benjamin for InvestmentNews.

Business development companies, or BDCs, are closed-end investment companies that invest in debt and equity of small public and privately held companies. Robert Waid, managing director at Wilshire Analytics, points out that BDCs offer attractive income opportunities since they required to pay out 90% of income in form of dividends.