“CPI is incorporated into portfolios specifically to provide a real return over inflation, without relying purely on duration,” Salvatore Bruno, Chief Investment Officer of IndexIQ, told ETF Trends. “Therefore, inflation is the primary driver of return and risk for the strategy. We see more conservative portions of the portfolio go to CPI compared to corporate bond or floating rate positions. We see cash being incorporated more into portfolios not for liquidity needs, but because investors do not find a suitable strategy that provides a real return over inflation without a significant reliance on duration.”
3. SPDR Blmbg BarclaysST HY Bd ETF (NYSEArca: SJNK)
Adding a mix of high yield bond ETFs could be akin to a nitrous oxide injection when racing against inflation. High-yield bond strategies led a Morningstar Inc list of top fixed-income performers during the second quarter, taking seven out of the 10 spots.
All in all, high-yield bond strategies have been outperforming their investment-grade counterparts by an average of 2%. SJNK seeks to provide investment results that correspond generally to the price and yield performance of the Bloomberg Barclays US High Yield 350mn Cash Pay 0-5 Yr 2% Capped Index.
SJNK invests its total assets in the securities comprising the index, which is designed to measure the performance of short-term publicly issued U.S. dollar-denominated high yield corporate bonds. The short-term maturities will help hedge some credit risk due to the lesser exposure, but holdings are still less than investment-grade. SJNK has returned 1.20% year-to-date, 2.94% the past year and 3.76% the last three years.
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