Fixed-income investors seeking attractive yields may look to an actively managed speculative-grade bond exchange traded fund to potentially enhance returns and navigate changing market conditions ahead.
The AdvisorShares Peritus High Yield ETF (NYSEArca: HYLD) has gained 3.9% year-to-date and is up 10.2% over the past year. The bond ETF also comes with an attractive 7.65% 30-day SEC yield.
HYLD has been outperforming its more popular junk bond ETF peers, namely the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) and the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK), the two largest high-yield corporate bond exchange traded funds by assets, which gained 3.2% and 2.5% over the past year, respectively.
“Peritus takes a value-based, active credit approach to the markets, primarily focusing on the secondary market where Peritus believes there is less competition and more opportunities for capital gains. Peritus de-emphasizes relative value in favor of long-term, absolute returns,” according to AdvisorShares.
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Ronald Heller, CEO and Senior Portfolio Manager of Peritus, attributed the outperformance in HYLD to some portfolio changes back in 2015, and the changes have since helped augment portfolio returns while still maintaining its attractive high-yield objective.
“We put in a full basket of Alpha generating Floating Rate Loans (20%), a bucket of New Issue Bonds (tough to get allocations but 25 years in HY market help) and roughly half of the portfolio remains our Alpha Bond picks,” Heller told ETF Trends. “This has allowed us a more diverse portfolio that has dampened volatility and yet allows us to add significant Alpha.”
Related: Opportunities for Active Management in the High Yield Debt Market
Specifically, as of the end of March, HYLD’s portfolio included oil E&P 11%, misc. manufacturing 2%, mining 2%, homebuilding & construction 1%, machinery diversified 3%, healthcare 5%, gas 1%, forest products & paper 2%, coal 3%, iron/steel 1%, entertainment & leisure 1%, electronics 3%, diversified financial services 4%, energy alternative & propane 3%, computer parts 2%, misc consumer products 1%, storage/warehouse 1%, oil & gas drilling/services 5%, pipelines 2%, retail & restaurants 5%, REITs 1%, telecom 7%, transportation 3%, advertising medea 4%, aerospace defense 1%, agriculture 1%, auto manufacturing & parts 1%, beverage & food 9%, biotech & pharma 5% and chemicals 3%.
However, potential investors should be aware that this active junk bond ETF comes with slightly greater credit risk when compared to its passive competitors. HYLD’s portfolio includes 10.0% B-rated debt, 61.6% B and 22.8% C.
For more information on the fixed-income market, visit our bond ETFs category.