Nevertheless, high yield will likely experience greater volatility going forward. While there’s a new sheriff in town, the Federal Reserve’s policy approach set by Janet Yellen is expected to remain unchanged, with more planned rate hikes and the continued unwinding of the Fed’s balance sheet ahead.
Consequently, ETF investors may limit volatility and still generate attractive yields through a targeted ETF strategy. The IQ S&P High Yield Low Volatility Bond ETF (NYSEARCA: HYLV) is is a rules-based, fixed income ETF that seeks to provide lower volatility exposure to high yield bonds. The ETF seeks to capture a large portion of the attractive yield offered by high yield bonds, while reducing the volatility with the riskiest credits. HYLV should offer better downside protection and improved risk-adjusted performance than market-cap-weighted index alternatives over the long term.
For more information on the speculative-grade debt market, visit our junk bonds category.