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.