The bulls have been giving up ground since last week following the massive rally that ensued as a result of the Federal Reserve delaying the much-anticipated bond taper. With stimulus fears off the table for now, investors have shifted their focus towards the debt ceiling debate as the next possible catalyst that may trigger a correction on Wall Street.
In light of the Fed kicking the “taper” can down the road, Guggenheim has added two high yield corporate bond ETFs to its BulletShares suite; these funds have launched at a time when many bargain shoppers are still starved for yield, but are becoming more cautious with their fixed income selection given rising interest rates on the horizon [see also 101 High Yielding ETFs For Every Dividend Investor].
Corporate “Junk Bond” ETFs Hit The Street: BSJJ, BSJK
Industry veteran Guggenheim launched the BulletShares 2019 High Yield Corporate Bond ETF (BSJJ) along with the BulletShares 2020 High Yield Corporate Bond ETF (BSJK) on September 23rd of this year. BSJJ and BSJK are designed to mimic the performance of a held-to-maturity bond portfolio, similar to all of the offerings in the BulletShares suite. These ETFs track the performance of U.S. dollar-denominated high yield corporate debt notes with effective maturities in 2019 (BSJJ) and 2020 (BSJK). The new ETFs charge 0.42% in expense fees, falling in line with the rest of the high yield BulletShares offerings [see Monthly Dividend ETFdb Portfolio].
The “held-to-maturity” feature is quite appealing for investors who don’t want to risk losing their principal in case of an interest rate-hike, which we are inevitably approaching. Similar to a traditional bond, these BulletShares funds will close upon maturity at the end of each respective year; at this time, investors will get the net asset value of all the bonds in the portfolio.
Currently, the “junk bond” flavors of BulletShares ETFs are more popular than their investment-grade counterparts:
- 2015 High Yield Corporate Bond ETF (BSJF, A-) has over $555 million in assets under management
- 2014 High Yield Corporate Bond ETF (BSJE, B+) has nearly $420 million in AUM
- 2015 Corporate Bond ETF (BSCF, A-) has over $400 million in AUM
- 2016 Corporate Bond ETF (BSCG, A-) has nearly $380 million in AUM
Meet The Competition
The new BulletShares funds will join a fairly crowded space, the High Yield Bonds ETFdb Category, which is comprised of over two dozen offerings with an average expense ratio of 0.56%. Although BulletShares separate themselves from the pack quite nicely by offering exposure that more closely resembles the purchase of an actual bond, BSJJ and BSJK will still face stiff competition from more established funds in the same category, including:
- iShares iBoxx High Yield Corporate Bond Fund (HYG, A) with $15 billion in AUM
- State Street SPDR Barclays Capital High Yield Bond ETF (JNK, A+) with over $9 billion in AUM
- PowerShare Senior Loan Portfolio (BKLN, A-) with nearly $6 billion in AUM
BSJJ and BSJK warrant a closer look under the hood from anyone looking to beef up their portfolio’s current-income stream while at the same time keeping their interest rate-risk to a minimum given the inherently safer nature of holding bonds to maturity as opposed to trading them.
Follow me on Twitter @SBojinov
[For more ETF analysis, make sure to sign up for our free ETF newsletter]
Disclosure: No positions at time of writing.