In a shifting interest rate environment, fixed-income ETF investors have to quickly adapt to the changing market.
On the upcoming webcast (available live and on demand for CE Credit), The Fed, Factor Investing and Fixed Income, Martin Kremenstein, Senior Managing Director and Head of ETFs at Nuveen, Joshua Jenkins, Portfolio Manager for CLS Investments, will address the fixed-income outlook for the remainder of the year and look to factor-based, fixed-income strategies that can act as an alternative to traditional bond investments.
For instance, the NuShares Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF (NYSEArac: NUSA) and the NuShares Enhanced Yield U.S. Aggregate Bond ETF (NYSEArca: NUAG) may help fixed-income investors take an alternative approach to bond investing.
The NuShares Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF tries to reflect the performance of the BofA Merrill Lynch Enhanced Yield 1-5 Year US Broad Bond Index, which is represented by a modified version of the more widely observed BofA Merrill Lynch 1-5 Year US Broad Market Index.
The Enhanced Index does not weight components by market capitalization, instead opting to assign components into a variety of categories based upon asset class, sector, credit quality and maturity. The smart beta indexing methodology then utilizes a rules-based process to include higher weights to categories with higher yields while maintaining risk and credit quality at levels similar to the Base Index.
Similarly, NUAG seeks to offer enhanced yield relative to the broad, investment-grade fixed income market with comparable risk and credit quality by reflecting the BofA Merrill Lynch Enhanced Yield US Broad Bond Index (Enhanced Index), which is designed to broadly capture the U.S investment grade fixed income market.
Rather than weighting by capitalization, the Enhanced Index assigns component securities into a variety of categories based upon asset class, sector, credit quality, and maturity, and then uses a rules-based methodology to allocate higher weights to categories with the potential for higher yields without significantly increasing risk or decreasing credit quality.
NUSA may be seen as a shorter term bond fund that complements Nuveen’s NUAG.
Financial advisors who are interested in learning more about factor and fixed-income investments can register for the Thursday, October 12 webcast here.