High Yield Bond ETFs Battle For Inflows: HYG vs. JNK

by on April 12, 2013 | ETFs Mentioned:

Interest in high yield bond ETFs has been on the rise ever since the Federal Reserve implemented its ultra-low rate policy following the 2007 housing market bubble. This breed of fixed-income securities has been popular among investors of all sizes looking to beef up their portfolio’s current return without incurring handfuls of volatility. High yield bonds commonly boast risk-return profiles that bear a close resemblance to safer, lower-yielding investment grade debt securities [see 101 High Yielding ETFs For Every Dividend Investor]. 

While there have been plenty of new entrants to the High Yield Bonds ETFdb Category over the years, two funds remain safely atop the list: the iShares iBoxx High Yield Corporate Bond Fund (HYG, A) and the State Street SPDR Barclays Capital High Yield Bond ETF (JNK, A).

Meet the Competitors

With over 20 high yield bond ETFs on the market, HYG and JNK separate themselves by being the biggest funds in the space, boasting over $15 billion and $11 billion in total assets under management, respectively. Although these products are seemingly identical, as each one tracks a basket of U.S. dollar-denominated junk bonds, the difference in inflows is a bit surprising when considering how much each one costs [try our Free ETF Head-To-Head Comparison Tool]. 

The Bottom Line

Despite a few close battles in 2009 and 2010, HYG is the clear winner here when it comes to inflows. What’s truly surprising is the fact that HYG boasts a larger portfolio than JNK in terms of assets under management, all the while charging 0.50% in annual expenses; JNK on the other hand features a more attractive 0.40% price tag. Nonetheless, each of these funds comes with its own set of quirks and nuances that make one more appropriate for some investors, which emphasizes the importance of taking a good thorough look under the hood before establishing a position. 

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Disclosure: No positions at time of writing.