Additionally, with the changing market environment, more investors are turning away from traditional stocks and bonds to alternative strategies as a way to diversify their investment portfolios. For instance, according to Morningstar/Barron’s Alternative Investment Study, 73% of advisors cite low correlation as a top reason for investing in alternatives.
Many are looking into BDCs for their attractive yields as they are required to pay out at least 90% of interest income received in cash dividends.
For instance, the Market Vectors BDC Income ETF (NYSEArca: BIZD) has a 9.1% 12-month yield. Additionally, the exchange traded note UBS E-TRACS Wells Fargo Business Development Index ETN (NYSEArca: BDCS) has a 8.61% 12-month yield and UBS E-TRACS 2x Wells Fargo Business Development Company Index ETN (NYSEArca: BDCL), which takes the leveraged 200% performance, has a 20.13% 12-month yield. [BDC ETF Options for High-Yield Investors]
TFMS Master Shares offers the Master Income ETF (NYSEArca: HIPS), which was launched in January. Rather than focusing on traditional common dividend stocks, HIPS emphasizes pass-through securities, or those companies that due to favorable tax treatment are obligated to distribute significant percentages of profit in the form of dividends – think master limited partnerships (MLPs), real estate investment trusts (REITs), business development companies (BDCs) and royalty trusts, among other asset classes. HIPS has a 7.4% yield.
For more information on BDCs, visit our business development companies category.
Max Chen contributed to this article.