Young Bond ETFs Make Their Mark

Approximately 200 exchange traded products debuted in the U.S. last year, the bulk of which were not fixed income funds.

However, last year was a record year for inflows to bond ETFs and some of that growth was contributed by fixed income funds that can still be considered young.

“S&P Capital IQ has rankings and research on approximately 240 fixed income ETFs. The more popular products remain those that are five-plus-years old and that are well-diversified across bond maturities, such as the Vanguard Total Bond Market ETF (NYSEArca: BND) and iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD). However, 46% of the universe is ETFs that have less than three years of history,” said S&P Capital IQ in a new research note.

The SPDR Short-Term High Yield ETF (NYSEArca: SJNK) is one of the most popular young bond ETFs. SJNJK, which is less than 60 days away from its third anniversary, has $3.9 billion in assets under management.

At a time when market observers are concerned about the exposure of high-yield ETFs to the energy sector, SJNK’s utility becomes more apparent because its weight to energy paper is less than the allocations to energy debt found in marquee high-yield bond ETFs. [Less Energy Exposure With These Junk Bond ETFs]

Rated marketweight by S&P Capital IQ, SJNK has a 30-day SEC yield of 5.83% and a modified adjusted duration of 2.41 years.

SJNK “has less interest rate sensitivity than other high yield ETFs with an average duration of 2.5 years. Bonds rated B or below from rating agencies that operate independent from S&P Capital IQ comprise 49% of the assets and provide a negative offset in our ranking. The ETF has a 0.40% expense ratio and a bid/ask spread of $0.01, quite tight to us considering the ETF is less than three years old,” according to S&P Capital IQ.

The Guggenheim BulletShares 2016 High Yield Corporate Bond Fund (NYSEArca: BSJG) is part of Guggenheim’s extensive defined maturity BulletShares lineup and is another prime example of a successful, young bond ETF. BSJG will celebrate its third anniversary in late April and is already home to $701.7 million in assets.