This ETF offers exposure to a basket of junk bonds from international issuers, giving investors a way to tap into a corner of the global bond market that is often overlooked. This ETF will primarily have appeal to investors looking to enhance current returns; IHY will often pay a significant yield that exceeds returns on domestic investment grade debt by a wide margin. Since most portfolios don't include an allocation to international junk bonds, IHY offers a way to potentially add to the depth of a portfolio and bring some diversification benefits as well.
There are a couple noteworthy aspects of IHY. First, the portfolio includes both developed and emerging markets. It should also be noted that the portfolio is split between dollar denominated bonds and those denominated in other currencies, thereby bringing some exchange rate risk but also currency diversification. Overall, IHY maintains a balanced portfolio that spreads holdings around multiple currencies, countries, sectors, and durations.
IHY could be useful as a component of a long-term portfolio, bringing enhancements to the current return portion. It could also be used as more of a tactical tool for establishing shorter term exposure to this asset class.