“Additional carry provides protection from underperformance and stability amid rising rates and currency volatility,” Rodilosso said. “Low yields make core fixed income sectors highly vulnerable to rising rates.”
Investors can look to overseas assets or corporate debt to bolster yield generation. For example, investors have a number of ways to gain exposure to the high yielding emerging bond market, such as the broad VanEck Vectors Emerging Markets Aggregate Bond ETF (NYSEArca: EMAG), VanEck Vectors J.P. Morgan EM Local Currency Bond ETF (NYSEArca: EMLC) and VanEck Vectors Emerging Markets High Yield Bond ETF (NYSEArca: HYEM). EMAG has a 4.26% 30-day SEC yield, EMLC has a 5.81% 30-day SEC yield and HYEM has a 5.76% 30-day SEC yield.
Fixed-income investors can gain exposure to corporate debt through options like the VanEck Vectors International High Yield Bond ETF (NYSEArca: IHY), which has a 4.08% 30-day SEC yield, and VanEck Fallen Angel High Yield Bond ETF (NYSEArca: ANGL), which has a 4.92% 30-day SEC yield.
Additionally, Ervin pointed to the actively managed Reality Shares DIVS ETF (NYSEArca: DIVY) as a good alternative for a conservative fixed-income position in a changing market environment.
“Isolated dividend growth is a fixed income replacement offering capital appreciation potential while historically delivering low correlation and low drawdowns across a variety of market environments,” Ervin said.
DIVY tries to provide exposure to the growth rate of expected dividends and looks to deliver long-term capital appreciation rather than income and yield through options contracts and dividend swaps.
“Because DIVY was designed to have a lower volatility than the S&P 500 while exhibiting higher returns than bonds, it serves as a potentially effective replacement for part of your bond portfolio allocation,” Ervin added.
Financial advisors who are interested in learning more about CFP/CIMA accredited panels on the online conference can watch the 2017 ETF Trends Virtual Summit on demand.