Checking In: Bonds, REITs, Stocks, Oh My
The vast majority of traditional long-only ETFs focus on just one specific asset class, be it bonds, commodities or stocks. However, multi-asset and asset allocation products are increasing in number and popularity with investors who want a little bit of everything, or least more than one asset class, in their ETFs.
The high-yielding Guggenheim Multi-Asset Income ETF (NYSE: CVY) was one of the earlier entrants to the multi-asset ETF category. Nearly six years old, CVY is now home to almost $642 million in assets under management. Proving there's room for more multi-asset funds, the Global X SuperDividend ETF (NYSE: SDIV) has accumulated more than $66 million in AUM in less than a year of trading.
CVY and SDIV are two of the known entities in the multi-asset ETF race, but the iShares Morningstar Multi-Asset Income Index Fund (NYSE: IYLD) is worthy of consideration as well. Just six weeks past its debut date, the iShares Morningstar Multi-Asset Income Index Fund is already home to $21.3 million in AUM, indicating investors are embracing this bond-heavy fund.
On that note, it should be said that IYLD is an ETF fund of funds, meaning all of its holdings are other iShares ETFs. Currently, IYLD is more than 51% to domestic fixed income funds. The iShares iBoxx $ High Yield Corporate Bond ETF (NYSE: HYG), the largest U.S. junk bond ETF, and accounts for over 19% of IYLD's weight while the iShares Barclays 20+ Year Treasury Bond ETF (NYSE: TLT) receives an allocation of 16.6%.
IYLD's other bond holdings include the iShares iBoxx $ Invest Grade Corporate Bond ETF (NYSE: LQD) and the iShares JPMorgan USD Emerging Markets Bond ETF (NYSE: EMB). In other words, IYLD's bond components have some spice to them and don' revolve boring, low-yielding U.S. Treasuries.
Roughly 29% of IYLD's weight is divided between the iShares Dow Jones Select Dividend Index Fund (NYSE: DVY) and the iShares S&P U.S. Preferred Stock Index Fund (NYSE: PFF). The iShares FTSE NAREIT Mortgage Plus Capped Index Fund (NYSE: REM) garners a weight of about 5%.
Since IYLD is still a new ETF, yield information isn't yet available for the fund, but it's reasonable to assume the yield will at least be decent. HYG, PFF and REM can all easily be considered "high yielders" while DVY, EMB and LQD at the very least fall into the "decent yield" category.
Income investors may also want to consider IYLD because it appears the fund will be paying a monthly dividend. Just six weeks old, the new fund has already made one payout.
On the downside, the ETF-of-ETFs concept isn't for everyone and while combining multiple high-yield plays under one umbrella is efficient when it comes to capital outlays, IYLD's yield could prove to be tempered relative to owning some of its constituents individually.
By no means does that imply this is a bad ETF, it's not. It's a new fund and as is the case with every new ETF, investors have time on their side and can let IYLD mature a bit before jumping in.
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