Some New, Obscure Bond ETFs Merit Consideration
Since the start of August, Direxion, FocusShares and Russell Investments have announced ETF closures for a combined 49 products. The noticeably quickened pace of ETF closures has prompted predictable opining that this is no environment for new funds.
Clearly, the exchange-traded products business has evolved and become more competitive. That does not mean rookie ETFs cannot thrive both in terms of performance and attracting assets. In fact, there are several examples of this with new bond ETFs. Believe it or not, there are new bond funds that are not the PIMCO Total Return ETF (NYSE: BOND) that are enjoying decent rookie years.
Note: Only funds that have debuted in 2012 were considered for this list.
Market Vectors Fallen Angel High Yield Bond ETF (NYSE: ANGL) The Market Vectors Fallen Angel High Yield Bond ETF debuted in April and after five months of trading, the fund has $10.3 million in assets under management. Since there is only speculation and little science behind what asset amount a new ETF needs to attract to be deemed a success, it is fair to say ANGL, at the very least, is off to a decent start.
Fallen angel bonds are those issues that once resided in investment grade territory but have since been lowered to junk status. That does not necessarily mean ANGL's roster of 66 holdings is loaded with cautionary tales. Issuers of fallen angel bonds are believed to have similar characteristics to investment grade issuers and fallen angel bonds themselves are often viewed as more stable than those that started off in junk territory.
With an expense ratio of 0.4 percent, ANGL has an average modified duration of 5.74 years and a 30-day SEC yield of 6.23 percent. The fund has risen almost 3.2 percent since its debut.
SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF (NYSE: EMCD) The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF is just two months old, but the fund is off to a fine start having accumulated $15.4 million in AUM since its June debut. What makes that haul all the more impressive is the fact that EMCD is competing with two slightly older rivals.
The WisdomTree Emerging Markets Corporate Bond ETF (NASDAQ: EMCB) and the iShares Emerging Markets Corporate Bond Fund (BATS: CEMB) both debuted earlier this year. While the WisdomTree offering is the clear-cut leader among emerging markets corporate bond ETFs at this point, EMCD has passed its iShares rival in AUM terms.
EMCD has also outperformed the iShares equivalent. The SPDR offering features a 30-day SEC yield of 3.87 percent and a modified adjusted duration of 5.87 years.
iShares Global High Yield Corporate Bond Fund (BATS: GHYG) The iShares Global High Yield Corporate Bond Fund has at least one feather in its cap. Since its April debut, the ETF has accumulated $25 million in AUM, one of the watermarks the so-called experts often look to judge the success of a new ETF.
Just how "global" GHYG is is up for debate. Nearly three-quarters of the funds holdings are denominated in U.S. dollars and the U.S. is the ETF's largest country weight at over 66 percent. The U.K. is next at just 5.4 percent.
GHYG is up just 1.4 percent since its June debut, but the fund features a 30-day SEC yield of 6.28 percent and income investors will like the fact that GHYG pays a monthly dividend.
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