High Yield ETF Solutions for a Rising Rate Environment

As fixed income investors consider ways to cope in a rising rate environment, some have turned to high-yield bond exchange traded funds to generate income and provide a cushion against pullbacks.

On the upcoming webcast, High Yield Solutions for a Rising Rate Environment, Fran Rodilosso, Head of Fixed Income ETF Portfolio Management at VanEck, will discuss potential income strategies and dive into various approaches for investors to consider during a rising interest rate environment.

For example, the VanEck Vectors Emerging Markets High Yield Bond ETF (NYSEArca: HYEM), which tracks the BofA Merrill Lynch Diversified High Yield US Emerging Markets Corporate Plus Index, holds a number of U.S. dollar-denominated bonds issued by non-sovereign emerging market issuers that are rated below investment grade, offering investors attractive yields. HYEM comes with a 5.55% 30-day SEC yield.

However, potential fixed-income investors should be aware of the risks as well. Given HYEM’s speculative-grade debt focus, the ETF’s credit quality includes junk-rated BB 62.3%, B 28.4% and CCC 7.9%. Moreover, the debt securities are non-sovereign, so they are largely comprised of corporate debt, including financial sector 40.1%, energy 16.4%, industrial 6.8%, basic materials 6.4% and utilities 6.2%, among others.