Market Overview

Some Sub-$100M Bond ETFs Looking Good, Too

As the debate about what an ETF's assets under management needs to be for the fund to be considered viable rages on, a few things are becoming clear. First, $100 million in AUM is the number most folks seem to focus on. Second, no empirical evidence exists to suggest an ETF's AUM total is a tell regarding the fund's ability to generate returns.

Third, evidence does exist that there are plenty of equity-based ETFs with less than $100 million in AUM that are delivering impressive returns. Finally, it is also clear, and unfortunately so, that many investors ignore ETFs due to superficial factors such as size and volume.

This scenario is not exclusive to ETFs that hold stocks as there are some fine examples of bond funds with sub-$100 million AUM totals that are doing quite well this year. Here are some to consider.

Arrow Dow Jones Global Yield ETF (NYSE: GYLD) The Arrow Dow Jones Global Yield ETF debuted in May and has managed to attract almost $21.6 million in AUM thus far. GYLD is not a pure play on bonds as global equities do account for nearly 20 percent of the fund's weight. Non-bond investments such as alternatives and REITs also combine for about 40 percent of GYLD, but the fund does allocate the rest of its weight to global sovereign and corporate debt.

The bulk of the fund's sovereign debt is dollar-denominated, a trait that risk-averse investors may find appealing. GYLD has returned almost seven percent since its debut and sports a 30-day SEC yield of 6.11 percent. The fund is also one of the best ways to get exposure to Venezuela, the world's top-performing equity market this year.

Market Vectors CEF Municipal Income ETF (NYSE: XMPT) Despite a rising number of municipal bankruptcies, municipal bond ETFs have posted stellar returns this year. Undoubtedly, investors have been drawn to the asset class due to decent yields and low default rates.

That also means investors have paying far more attention to ETFs such as the Market Vectors High-Yield Muni ETF (NYSE: HYD) and the iShares S&P National AMT-Free Municipal Bond Fund (NYSE: MUB). In the process, the Market Vectors CEF Municipal Income ETF has been all but ignored. Ignoring XMPT because it has just $13.1 million in AUM has not been a wise move. The fund pays a monthly dividend, has a 30-day SEC yield of 5.3 percent and is up 8.6 percent year-to-date.

iShares Baa - Ba Rated Corporate Bond Fund (BATS: QLTB) Maybe it is because the iShares Baa - Ba Rated Corporate Bond Fund trades on an exchange that some traders and investors are not familiar with. Maybe it is because such much attention has been heaped on more familiar corporate bond fare such as the iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSE: LQD) and the iShares iBoxx $ High Yield Corporate Bond Fund (NYSE: HYG).

Whatever the reasons are, QLTB has drawn in just $10.5 million in AUM since its late April debut. In QLTB's favor, it has performed almost inline with LQD since coming to market. The fund's holdings do not dwell too deep in junk status as only 0.5 percent of the holdings are rated B/B2 on the Standard & Poor's scale. The 30-day SEC yield is 3.3 percent.

WisdomTree Emerging Markets Corporate Bond Fund (NASDAQ: EMCB) If not for the PIMCO Total Return ETF (NYSE: BOND), the WisdomTree Emerging Markets Corporate Bond Fund would likely be the most successful new bond to debut this year. It is not an apples-to-apples comparison, but EMCB is up almost eight percent in the past six months compared to a gain of nearly six percent for BOND.

It also appears EMCB's time below $100 million in AUM is limited because its asset growth has been nothing short of impressive. Just two months ago, the fund had less than $63 million in AUM. As of the close of markets Tuesday, that number had risen to almost $88.3 million, according to WisdomTree data.

EMCB's 30 holdings are dollar-denominated and feature an effective duration of 6.26 years. The average yield to maturity is 4.37 percent.

For more on ETFs, click here.

Posted-In: Long Ideas News Bonds Short Ideas Dividends Dividends Specialty ETFs New ETFs Best of Benzinga

 

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