In today’s low-rate environment, many fixed income investors are diversifying their portfolios with debt markets overseas. Vanguard offers two compelling options on this front. Capturing income from debt markets outside the U.S allows investors to access credit profiles from different countries that are in various stages of their respective economic cycle.
Corporate bond exposure can help diversify a fixed income portfolio, especially if it’s laden with safe-haven government debt. Vanguard offers three ETFs to choose from. Corporate bonds have the ability to offer more attractive yields, as compared to government debt like Treasury notes.
Actively managed exchange traded funds are bringing in assets at a prodigious pace , but the group remains a small slice of the overall ETF industry. An obvious area in which active ETF issuers can gain market share is fixed income.
The tightening of credit spreads may dissuade fixed income investors from heading into corporate bonds, but an added dose of scoring efficiency can help ease credit risk concerns with the FlexShares Credit-Scored US Long Corporate Bond Index Fund (LKOR) .
KraneShares has introduced a new China-focused fixed income ETF providing exposure to renminbi-denominated securities included in the Bloomberg Barclays Global Aggregate Index . The fund is the first ETF to target renminbi-denominated securities included within the Bloomberg Barclays Global Aggregate Index.
Leveraged loans and their related exchange traded funds are regaining fans this year as advisors look for the elusive combination of income and protection against rising Treasury yields. That trend could continue benefiting the actively managed SPDR Blackstone/GSO Senior Loan ETF (NYSEArca: SRLN) .
The growth versus value narrative doesn’t have to begin and end with equities when bond-focused exchange traded funds (ETFs) can get in on the action with the FlexShares Credit-Scored US Corporate Bond Index Fund (SKOR) . Even as the effects of the pandemic are slowly dissipating, the risk of default is always apparent when investing in debt issues.
Fixed income investors looking to get high yield exposure outside of the U.S. while limiting duration risk will want to consider the Invesco Global Short Term High Yield Bond ETF (PGHY) . PGHY offers investors the yield they desire in this current fixed income environment.
Credit spreads are tightening, which could be causing investors to shy away from the extra risk associated with high yield, but there are safer options like municipal bonds and the Vanguard Tax-Exempt Bond ETF (VTEB) . The past month saw equities get racked with a bout of volatility as inflation fears put investors in a state of unease.
Broadly speaking, investors view emerging markets as riskier than developed economies, and the same is true when comparing high-yield corporate bonds with investment-grade fare. Combine emerging markets and junk bonds and the ingredients are there for risky and volatile recipe.
Investors have various options to protect their bond portfolios from inflation, but with the ProShares High Yield—Interest Rate Hedged (HYHG) , they get hedging baked right into the exchange traded fund (ETF). With a focus on high yield, HYHG also gives investors an opportunity to edge out low yields on safe haven Treasury notes or other investment-grade debt.
Tight credit spreads might be keeping many fixed income investors from heading into corporate bonds, but funds like the Vanguard High Dividend Yield ETF (VYM) could benefit from a pension bailout. “U.S. President Joe Biden’s pension bailout might do more than just support troubled retirement plans,” a Bloomberg article said. “It could also spur tens of billions of dollars in demand for corporate bonds with the lowest investment-grade ratings, according to Citigroup Inc.”
As the Fed mulls over mull slowing down its bond-buying program, how can bond investors benefit? Last year, the Fed instituted a bond-buying spree amid the market tumult. That included purchasing risky bond assets like high yield exchange traded funds (ETF) to stymie the risk of defaults in the debt market.
In times like these, investors can limit portfolio drawdowns by diversifying with fixed income exchange traded funds. While the equity markets pulled back, investors turned to safe havens, purchasing bonds and pulling yields on Treasuries down.
