The evolution of fixed income in the exchange-traded fund (ETF) space has undoubtedly opened doors for investors to provide easy access to this asset class. Now, investors have a plethora of options when it comes to the bond market, especially with the advent of fixed income ETFs.
For investors looking to add exposure to the bond market while reaping the benefits of doing so through the ETF wrapper, it can be daunting to look at the options available. One place to start is to look at the best performers during the month of April.
Here are five to look at:
Barclays Inverse US Treasury Aggregate ETN (NasdaqGM: TAPR)–4.21% YTD
TAPR seeks a return linked to the performance of the Barclays Inverse US Treasury Futures Aggregate Index™. The index employs a strategy that tracks the sum of the returns of periodically rebalanced short positions in equal face values of each of the 2-year, 5-year, 10-year, long-bond and ultra-long U.S. Treasury futures contracts. The index contains an equal synthetic short position in each Treasury futures contract that is either the Treasury futures contract closest to expiration or the next Treasury futures contract scheduled to expire immediately following the front contract.
ProShares Inflation Expectations ETF (NYSEArca: RINF)–3% YTD
RINF is “designed to provide exposure to 30-year breakeven inflation (a widely followed measure of inflation expectations),” according to Maryland-based ProShares. “The fund’s index is designed to be sensitive to changes in breakeven inflation. It is not designed to reflect CPI or other measures of realized inflation.”
TIPS are a type of Treasury security that are indexed to inflation as a way to shield investors from the negative effects of inflation. The securities’ par value rises with inflation as measured by the Consumer Price Index while interest rate remains fixed. TIPS also offer investors another layer of diversification as many aggregate bond funds exclude TIPS from their holdings.
SPDR Blackstone / GSO Senior Loan ETF (NYSEArca: SRLN)–2.2% YTD
SRLN seeks to provide current income consistent with the preservation of capital through investing in the Blackstone / GSO Senior Loan Portfolio. SRLN invests in senior loans given to businesses operating in North America and outside of North America. The Portfolio may invest in senior loans through the loans directly via the primary or secondary market or via participations in senior loans, which are contractual relationships with an existing lender in a loan facility where the loan portfolio purchases the right to receive principal and interest payments.
By including senior loans in SRLN’s portfolio, the loans first lien priority, meaning in the event of a borrower default, the senior loans are paid first. Higher payment priority assists liquidity in terms of the defaulting borrower having to sell assets in order to pay off creditors–in this case, senior loans within the SRLN portfolio are given higher priority–a viable option especially during a market downturn.