The U.S. Bloomberg Barclays Aggregate Bond Index has been a guiding beacon for many fixed-income investors over a three-decade long bull market, but the Federal Reserve’s tightening monetary policy could leave many exposed to greater risks.
On the upcoming webcast Thursday, Aug. 9, The Fed, Factor Investing and Fixed Income, Jordan Farris, Managing Director and Head of ETF Product Development at Nushares from Nuveen, and Robby Flink, Advisor for Infinity Financial Group, will delve into the bond market, consider the growing risks that many investors now face and look to a smart alternative that could help generate income while limiting potential downside risks.
For example, 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.