Accretive Asset Management LLC announced last week the launch of a family of high yield bond indexes that could soon be the basis for a new suite of exchange-traded funds. The BulletShares USD High Yield Corporate Bond Indices are maturity-targeted benchmarks that measure the performance of U.S. dollar denominated non-investment grade bonds. Each index includes junk bonds scheduled to mature in a certain year, meaning that securities seeking to replicate the performance will have a cash flow profile similar to that of an individual held-to-maturity bond.
The new suite consists of ten indexes, beginning with the BulletShares USD High Yield Corporate Bond 2012 Index and running through a 2021 version. “We are excited to bring the BulletShares methodology to the high yield sector of the corporate bond market,” said Darrin DeCosta, head of product development for Accretive Asset Management. “The remarkable success of investment products based on our existing investment grade corporate bond indices suggests to us that financial advisors and investors see value in our approach to indexing bonds, which seeks to combine the best attributes of individual bonds and bond funds.”
Last year, Claymore (now Guggenheim) launched a series of target maturity date fixed income ETFs focusing on the investment grade bond space. Those products, which include bonds maturing in 2011 (BSCB) through 2017 (BSCH) have gradually gained traction with investors looking for bond ETF that exhibit the cash flow characteristics of traditional fixed income securities [see Counting Down The Best NEw ETFs Of 2010].
Most fixed income ETFs cycle securities in and out of the underlying portfolio as maturities change, essentially simulating the experience of immediately reinvesting any proceeds received from a maturity event. For liabilities-based investors, ranging from pension funds to families saving for college tuition, target maturity date bond ETFs allow for immediate diversification across a number of different securities as well as an expected maturity payment at a known date in the future.
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Disclosure: No positions at time of writing.