Van Eck Debuts Hedged High Yield Bond ETF
Market Vectors ETF Trust introduced a new corporate bond fund that hedges against rising interest rates.
The Market Vectors Treasury-Hedged High Yield Bond ETF (NYSEARCA:THHY) aims to combine the income potential of high-yield corporate bonds while simultaneously shorting Treasury notes.
"With THHY, investors have the ability to better position their bond portfolios now for a rising interest rate environment, but they can do so while still earning income on the fund and even have upside potential during a low interest rate environment, said Fran Rodilosso, Fixed Income Portfolio Manager with Market Vectors. "I believe it is not a question of if, but rather when, we will begin to see rising interest rates." The total U.S. bond market (NYSEARCA:AGG) carries a 12-month yield of around 2.60%, while the yield on 10-year U.S. Treasuries (NYSEARCA:IEF) is at 1.91%. (Watch our latest ETF Video: What's the Future of Fixed Income ETFs?)
THHY is linked to the Market Vectors U.S. Treasury-Hedged High Yield Bond Index. It contains below-investment grade corporate bonds, denominated in U.S. dollars, and, through the use of 5-year U.S. Treasury notes, a hedge against the price sensitivity to interest rate fluctuations of the bonds included in the index. The fund and its underlying index do not currently use any swaps or derivatives.
Market Vectors points out that an investment of this kind is not without risks, including those associated with high-yield securities, such as sensitivity to adverse economic changes or individual issuer developments, as well as liquidity concerns, credit risk, interest rate risk and risks associated with hedging.
THHY is the latest addition to Market Vectors' family of high-yield bond ETFs, including International High Yield Bond ETF (NYSEARCA:IHY), Emerging Markets High Yield Bond ETF (NYSEARCA:HYEM), and Fallen Angel High Yield Bond ETF (NYSEARCA:ANGL). As of December 31, 2012, the total assets for the seven ETFs in this group amounted to approximately $1.5 billion.
THHY has a net expense ratio of 1.45% with the fund's expenses capped at 0.50% until September 1, 2014. Cap excludes certain expenses, such as interest.
Market Vectors launched in 2006 and now includes 52 ETFs that span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family totaled $27.9 billion in assets under management, of December 31, 2012. Market Vectors ETFs are sponsored by Van Eck Global
Other ETP LaunchesBarclays Bank introduced the Barclays ETN+ Select MLP ETN (NYSEARCA:ATMP). The note is designed to provide investors with exposure to a basket of midstream U.S. master limited partnerships (MLPs) within the Atlantic Trust Select MLP Index. Additionally, the note has exposure to general partners of U.S. MLPs in Canada.
AMLP charges annual fees of 0.95% and contains exposure to a basket of between 20 and 100 MLPs. MLPs included in the Index belong to the GICS Energy Sector or Gas Utilities Industry. Limited partner (LP) interests in MLPs are given a maximum 8% weighting, while the general partner (GP) of an MLP, is given a maximum weight of 4%. The index is rebalanced quarterly. (Get our list of Top Yielding ETPs and Top Performing Sector ETFs in our latest ETF Profit Strategy Newsletter.) "The objective of the Index is to focus on a select group of midstream MLPs, as defined by credit ratings, size and other criteria, and their respective general partners", said Adam Karpf, Portfolio Manager and Managing Director at Atlantic Trust. "Within the MLP sector, we believe that investment grade midstream MLPs offer an attractive opportunity set to capitalize on the secular trends in the energy industry. The inclusion of midstream general partners in the Index, structured as both MLPs and corporations, provides additional exposure to a fast growing and attractive sub-sector in the energy infrastructure industry."
The average historical yield for AMLP's index is 5.5%.
High Dividend ETF from Global XGlobal X Funds launched the the Global X SuperDividend U.S. ETF (NYSEARCA:DIV). DIV provides exposure to 50 companies that rank among the highest dividend yielding equity securities in the United States.
The Global X SuperDividend U.S. ETF is linked to the INDXX SuperDividend U.S. Low Volatility Index, which assigns an equal weight to each of its 50 equity hodlings. The fund also has sector caps of 25% are used to ensure that the portfolio is not heavily overweight in a particular sector and to provide an additional layer of diversification. A low-volatility filter is used in an effort to further dampen the volatility of the portfolio. DIV is projected to pay monthly dividends. (Learn more about ETFguide's 2013 Top Ranked Commission Free ETF Brokers.)
DIV offers investors exposure to a broad group of industries: REITS (24%), Utilities (24%), MLPs (18%), Telecommunications (12%), Consumer Staples (8%), Health Care (6%), Consumer Discretionary (4%), Industrials (2%), and Technology (2%).
"In an environment where people are seeking monthly income, the SuperDividend U.S. ETF offers convenient access to 50 high yielding companies in the US through one security," said Bruno del Ama, chief executive officer of Global X Funds. "Based on the research we have conducted, we believe very high-yielding dividend stocks are generally overlooked and may play an important role in a portfolio."