Traditionally speaking, when investment-grade corporate bond spreads tighten, advisors and investors need to look outside the box to make sure they hit those crucial income goals. Oftentimes, high-yield bonds and structured credit can serve as alternative sources of income to fill this gap.
Key Takeaways:
- Whenever investment-grade corporate bond spreads end up tightening, folks look for other options to amplify their yield. However, high-yield bonds face risks from the Fed and inflation down the line.
- Structured credit can bring in the income necessary to make sure investors meet their yield needs, while diversifying a fixed income portfolio through the structured credit market.
- The Guggenheim Securitized Income ETF (GISC) offers its own compelling approach to structured credit, targeting complexity premiums through active management.
However, the macroeconomic environment may not be favorable for high-yield bonds in the coming months. Sticky inflation and potential rate hikes can prove to be perilous for these securities, especially given that it’s unclear how long inflation will be sticking around for.
As such, it could pay off for advisors and investors to look for additional income through alternative means. One way to do so is through gaining exposure to the structured credit markets.
Think of it this way: many structured credit allocations can generate yield comparable to high-yield bonds, but with lower default risks. It can also offer significant diversification, which can be a valuable boon to a balanced fixed income portfolio.
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GISC’s Take on Structured Credit Exposure
Of course, not all structured credit strategies are created equal and choosing the right one is key. For this reason, the Guggenheim Securitized Income ETF (GISC) could be a good choice because it has the versality to easily fit across a variety of different portfolio strategies.
GISC is an actively managed fund from Guggenheim Investments that looks to provide significant income through the structured credit universe. The fund’s disciplined portfolio team takes advantage of GISC’s active framework, navigating the structured credit market in search of undervalued securities. Furthermore, GISC aims to tap into complexity premiums by investing in securities that require more detailed knowledge and expertise to evaluate.
This kind of approach could help advisors and investors that are looking to build a more balanced fixed income portfolio, especially if corporate bond spreads end up tightening. With flexible active management, deep value opportunities, and the inherent benefits of the structured credit market, GISC could bring a lot to the table.
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