Exchange traded funds (ETFs) may have siphoned billions of investment money out of mutual funds in the past year, but when it comes to high-yield bonds, mutual funds are bringing a competitive game.
In March, more than $1 billion found its way into two of the largest high-yield ETFs: the iShares iBoxx $ High Yield Corporate Bond (NYSEArca: HYG) and SPDR Barclays High Yield Bond (NYSEArca: JNK), indicating investors’ growing interest in high-risk/high-yield bonds and increasing confidence in the economic recovery, comments Don Dion for TheStreet. [ETFs to Earn Income When Yields Elsewhere Are Low.]
HYG has an index with 300 holdings, an expense ratio of 0.50% and a 8.1% yield. As a result of the fund’s large holdings, the fund has a very equal weighting among its holdings, with its top 10 holdings only accounting for 10% of its portfolio. Top holdings include debt of Texas Competitive Electric (NYSE: NRG) and Sprint Nextel (NYSE: S)
JNK has an expense ratio of 0.40% and 8.3% yield. JNK’s index is more concentrated, compared with that of HYG’s. JNK’s top 10 holdings make up almost 20% of the fund’s total index. Top holdings include debt from AIG (NYSE: AIG), GMAC (NYSE: GJM) and Citigroup (NYSE: C).