Investors are increasingly looking beyond traditional stocks and bonds to meet their income goals. One fund drawing attention for its generous yield is the GraniteShares HIPS US High Income ETF (HIPS).
While the ETF’s total-return performance has lagged recently, HIPS is still handily outpacing its category peers in terms of yield. HIPS boasts a trailing yield of 11.12%, significantly outpacing the 7.18% category average.
HIPS is able to generate this substantial yield due to its unique, diversified basket of alternative income streams. The fund’s name stands for high income pass-through securities, and it provides exposure to four distinct asset classes. Its portfolio is strategically balanced, with allocations heavily weighted toward closed-end funds (CEFs) at 26.8%, real estate investment trusts (REITs) at 25.7%, master limited partnerships (MLPs) at 24.5%, and business development companies (BDCs) at 23.0%.
How These Structures Generate Yield
This “pass-through” structure is the engine of the fund. MLPs, primarily owning energy infrastructure such as pipelines, are considered strong hedges against inflation and have demonstrated the ability to generate income in various interest rate environments. REITs offer a similar benefit, as property owners are able to raise rents.
BDCs, which have been in the spotlight, provide capital to private, midsize businesses and may benefit from a high-rate environment. CEFs round out the portfolio, offering actively managed exposure to other income-producing assets. Importantly, by law, most of these entities must distribute the vast majority of their earnings to shareholders, which in turn fuels the ETF’s high payout.
The HIPS strategy appears well-suited for the current economic landscape of late 2025, despite recent performance. With inflation remaining sticky, the real-asset exposure from MLPs and REITs is highly relevant for investors seeking to protect purchasing power. Furthermore, as the Federal Reserve modestly eases rates, the environment becomes more favorable for high-yield assets. This easing, combined with a resilient economy that has avoided a deep recession, helps support the underlying cash flows of the companies and properties in HIPS’ portfolio.
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