Despite Falling Yields, Junk Bond ETFs are Still Attracting Huge Inflows

As investors continue to chase yield anywhere they can get it, the high-yield bond sector remains red hot, despite sharply higher risk levels.

We cannot ignore the fact that High Yield Corporate Bonds — as measured by the two largest and most popular ETFs in the segment, the iShares iBoxx $ High Yield Corp Bond ETF (NYSE:HYG) (Expense Ratio 0.50%, $16.4 billion in AUM) and SPDR Barclays Capital High Yield Bond ETF (NYSE:JNK) (Expense Ratio 0.40%, $12.4 billion in AUM), are trading at new multi-year highs today on a lift in the segment.

Even with falling yields in the High Yield space, we have still seen net inflows year-to-date to the tune of about $680 million into HYG, and more than $2 billion entering JNK during this same timeframe. From a sector standpoint, it is worth looking at which sectors are populating the “High Yield Corporate Bond” space currently.

For instance, we see a heavy weighting to Communications companies in HYG (24.72%). The next largest sector exposure is 13.37% to the Consumer Staples space, followed by lesser exposures of 13.08% to Energy, 12.35% to Consumer Discretionary and so on down the line to the other industry sectors.

While HYG and JNK are the two largest funds in the broad U.S. High Yield or “Junk” bond space, several other names that may not get the recognition that they deserve because of lower asset and/or trading volume levels than the very popular HYG and JNK exist here as well. Many of these other funds have also posted impressive returns for the most part year-to-date, with many trading at new all-time highs today.

Some of these may be considered niche oriented strategies within the High Yield ETF space, and not straight indexing approaches as the aforementioned HYG and JNK. A few of the best performers in 2016 to list here that surely fly under radars include ANGL (VanEck Vectors Fallen Angel High Yield Bond, Expense Ratio 0.40%, $325 million in AUM), QLTC (iShares B-Ca Rated Corporate Bond, Expense Ratio 0.35%, $11.7 million in AUM), HYLD (Peritus High Yield, Expense Ratio 1.18%, $209 million in AUM), PHB (PowerShares Fundamental High Yield Corporate Bond Portfolio, Expense Ratio 0.50%, $1 billion in AUM), CJNK (SPDR BofA Merrill Lynch Crossover Corporate Bond, Expense Ratio 0.30%, $37 million in AUM), and HYZD (WisdomTree BofA Merrill Lynch High Yield Bond Zero Duration, Expense Ratio 0.43%, $14 million in AUM).

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch
paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.

Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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