Low Volume Bond ETFs Thriving, Too
It is not just low volume equity-based ETFs that are delivering solid and, in some cases, spectacular returns for investors. Some lightly traded bond ETFs are getting in on the act as well. A list of the 10 best equity ETFs in terms of year-to-date performance compiled by Index Universe indicates that only half, or five, of the funds on that list have what many investors would deem "decent" average daily turnover.
Simply put, fixating on an ETF's average daily volume can mean missing out on some great returns with equity funds. Importantly, that theme is not limited to the universe of equity-based ETFs.
The same can be said of bond ETFs. Traders and investors surely know about heavily traded bond funds such as the iShares iBoxx $ Invest Grade Corporate Bond ETF (NYSE: LQD), the SPDR Barclays Capital High Yield Bond (NYSE: JNK) and the PIMCO Total Return ETF (NYSE: BOND), just to name a few.
Those are fine ETFs in their own right, but there are opportunities to be had with thinly traded bond funds just as there opportunities to be had with light volume equity ETFs.
Take the example of the WisdomTree Emerging Markets Corporate Bond Fund (NASDAQ: EMCB). The WisdomTree Emerging Markets Corporate Bond Fund has been one of the best new bond ETFs to come to market this year in terms of attracting assets (after BOND, of course). Following its March debut, EMCB now has almost $71 million in AUM, but its daily volume is not inspiring at less than 17,700 shares.
Focusing on the volume metric alone means investors have missed out on a gain of 5.2 percent, a current 30-day SEC yield of almost four percent and six dividend payments because EMCB pays a monthly dividend.
WisdomTree sponsors another ETF that belongs in this conversation, the WisdomTree Asia Local Debt Fund (NYSE: ALD). Before everyone and his sister was thrilled to bits that the PIMCO Total Return ETF was the alleged savior of the actively managed ETF space, a couple of actively managed bond ETFs were thriving. They still are and ALD is one of them.
ALD offers exposure to the sovereign debt of South Korea, Malaysia, Indonesia, Philippines, Thailand, India, China, Hong Kong, Singapore, Taiwan, Australia and New Zealand denominated in the local currencies of those nations. The fund has over $430 million in assets, but has ADV of just 34,500 shares. That has not prevened ALD from gainin almost four percent this year.
Staying with the emerigng markets theme, the Market Vectors LatAm Aggregate Bond ETF (NYSE: BONO) is diminutive both in terms of AUM ($7.7 million) and ADV (3,800 shares). Still, BONO has gained almost 7.7 percent this year, features a 30-day SEC yield of 5.35 percent and offers an excellent way of getting exposure to the improving credit quality of some Latin American nations.
Taking a look at a more domestically-focused fund, the SPDR Nuveen S&P High Yield Municipal Bond ETF (NYSE: HYMB) is a great example of a low volume ETF with a decent AUM total. The 18-month-old ETF has almost $144 million in AUM despite despite ADV of less than 35,700 shares.
Neither light volume nor an allocation in excess of 10 percent to California bonds has stood in the way of HYMB gaining almost nine percent this year. HYMB is up nearly 15 percent since its debut.
For more on low volume ETFs with sound returns, click here.
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