A Pair of Options for Fixed Income Investors Seeking More Yield

Even with the threat of rising rates, yields are still low by historical standards. Fixed income investors looking to extract more yield have a pair of options from FlexShares.

As credit markets start to improve in an improving U.S. economy, high yield is an option for investors to get extra passive income. One exchange traded fund worth looking at is the FlexShares High Yield Value-Scored Bond Index Fund (HYGV).

HYGV seeks investment results that correspond generally to the price and yield performance of the Northern Trust High Yield Value-Scored US Corporate Bond Index, which reflects the performance of a broad universe of U.S.-dollar denominated high yield corporate bonds that seeks a higher total return than the overall high yield corporate bond market, as represented by the Northern Trust High Yield US Corporate Bond Index.

“This fund is for investors looking to add income while avoiding some of the riskiest junk debt,” an ETF Database analysis explained.

A Variable Income Option

For investors who want passive income aside from just high-yield corporate bonds, there’s the FlexShares Ready Access Variable Income Fund (RAVI). One of the dynamic features of RAVI is its active management.

RAVI seeks maximum current income consistent with the preservation of capital and liquidity. The fund seeks to achieve its investment objective by investing at least 80% of its total assets in a non-diversified portfolio of fixed income instruments, including bonds, debt securities, and other similar instruments issued by U.S. and non-U.S. public and private sector entities.

The dollar-weighted average portfolio maturity of the fund is normally not expected to exceed two years. It may invest up to 20% of its total assets in fixed income securities and instruments of issuers in emerging markets.

In addition to seeking yield, RAVI minimizes volatility in the bond markets with lesser duration.

“In our view, the variety of fixed-income assets available to the NTI investment team provides flexibility to manage the FlexShares Ready Access Variable Income Fund’s (RAVI) duration and liquidity according to their outlook for interest rates and market conditions,” a fund case study noted. “Targeting durations above the three-month cap on money market funds, but below the 1.5-year minimum duration typically offered by short-term bond funds, may provide higher returns than money market funds while limiting the potential for principal volatility.”

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