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Top 10 High-Yield, Emerging-Market Bond ETFs

Demand for yield is a condition not lost on ETF issuers and new products were issued and assets in these categories have grown substantially. We'll investigate some, not all, of the top issues in both these sectors.

Let's look at typical and more popular choices.

HYG (iShares iBoxx High Yield Bond ETF) tracks the index of the iBoxx High Yield Index. It's been a big money maker for iShares given the fee of .50%. The current yield is near 7.75% and one year return is over 18% which enhances the "you get what you pay for" theme. AUM (Assets under Management) are just shy of $9B and average daily trading volume is just over 1M shares. As demand increases for both ETFs and mutual funds, supply considerations become more difficult to deal with for all sponsors. Over 40% of holdings are rated B and the average duration is less than 10 years.

 

Data as of June 2011

HYG Top Ten Holdings & Weightings

  1. Citigroup 7%:                                       1.15%
  2. Lyondell Chemical 11%:                      0.94%
  3. HCA 9.25%:                                         0.87%
  4. First Data 12.625%:                             0.83%
  5. Citigroup 7%:                                       0.82%
  6. Intelsat Bermuda 11.25%:                    0.76%
  7. Texas Competitive Electric 11.5%:       0.72%
  8. Springleaf Financial 6.9%:                   0.72%
  9. CHS Community Health  8.875%:        0.71%
  10. Energy Future Inter Holdings 10%:     0.64%

JNK (SPDR Barclays Capital High Yield Bond ETF) seems a little odd doesn't it? As competitors you see HYG follow one index while JNK follows a Barclay's index owned by the other. Such is the result of mergers. Nevertheless, State Street needed to be in the game and has done so with a competitive offering with a lower fee (.40%) and AUM of $7.3B with average daily trading volume of 2.7M shares. The current yield is a little over 8% with a one-year return of 12.80%. The highest holdings consist of 50% rated B with an average duration of less than 10 years.   

Data as of June 2011

JNK Top Ten Holdings & Weightings

  1. Citigroup 7%:                                                   3.51%
  2. Lyondell Chemical 11%:                                   1.73%
  3. First Data 144A 12.625%:                                1.51%
  4. Harrah's Operations 10%:                                1.43%
  5. Intelsat Bermuda 11.25%:                                1.41%
  6. Energy Future International Holdings 10%:     1.12%
  7. Wind Acquisition Financial 11.75%:                 1.09%
  8. Clear Channel Holdings 9.25%:                       1.04%
  9. Residential Capital Corp 9.625%:                     1.01%
  10. FMG Resources PTY  7%:                              0.99%

 

PHB (PowerShares Fundamental High Yield Bond ETF) is based on the RAFI High Yield Bond Index which has more enhanced qualities to the index making it quasi-active. The official description consists of the index measuring the "theoretical portfolio of high yield bonds" of public companies listed on a major stock exchange. The expense ratio is .50% and the current yield is roughly 7% with a one year return of nearly 11%. AUM is $483M with average daily trading volume around 260K shares. Over 70% of the holding are rated BB which is higher than their two chief competitors while average duration is also less than 10 years.

Data as of June 2011

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