Rieger Report®: JNK v. HYLV: Two Different High Yield ETFs

SPDR Bloomberg Barclays High Yield Bond ETF (JNK) v.

IndexIQ S&P High Yield Low Volatility Bond ETF (HYLV)

  • Two very different approaches to U.S. dollar high yield bonds.
  • Both are passive and are managed to an index.
  • They have similar management fees.
  • JNK is a pure “beta” play based on bonds that are constituents of the Bloomberg Barclays U.S. High Yield Index.
  • HYLV follows the S&P U.S. High Yield Low Volatility Corporate Bond Index which applies rules in specific order and progression to identify bonds that are less volatile than other bonds.
    • Premise: In periods of equity market volatility and/or rising rates focusing on bonds with lower volatility will provide less downside risk.

RiegerReport_091919-1_1

Sources: SPDRs, New York Life Investments & S&P Dow Jones Indices LLC. Table is provided for illustrative purposes only. Past performance is not a guarantee of future results. Data as 9/16/2019 except as noted. 1 30 Day SEC Yield as of 8/31/2019. 2 S&P U.S. High Yield Low Volatility Corporate Bond Index yield and duration.

So where do I stand?

The market environment hasn’t yet stressed either ETF from any real perspective: liquidity, volatility, defaults or credit spread widening.

JNK is a dominant ETF. It has size, scale and liquidity that HYLV does not yet enjoy. It also has higher yields than HYLV. In my view, JNK is the choice for low cost “beta” exposure to the corporate junk bond market.

If you are concerned about upcoming bond market volatility, an equity market downturn, recession, period of credit spreads widening or even rising rates then understanding the philosophy and underlying index rules of HYLV. Dive into the prospectus and index methodology with the understanding that the real test hasn’t yet happened.

Click here for a print friendly version of this report.

Copyright © 2019 Rieger Report LLC. All rights reserved. Redistribution in whole or in part is prohibited without written permission of the Rieger Report LLC. All information provided by the Rieger Report LLC is for informational purposes only, impersonal, and not tailored to the needs of any person, entity or group or persons. It should not be considered financial advice. The Rieger Report LLC receives compensation in connection with licensing its research, advertising on its website, speaking and consulting services.
Past performance of any investment product or index referenced in the Rieger Report is not an indication of or guarantee of future results.
The Rieger Report LLC is not an investment advisor, and the Rieger Report LLC makes no representation regarding the advisability of investing in any such investment fund or other investment vehicle. A decision to invest in any such investment fund or other investment vehicle should not be made in reliance on any statements set forth in this document. Prospective investors are advised to make an investment in any such fund or other vehicle only after carefully considering the risks associated with investing in such funds, as detailed in an offering memorandum or similar document that is prepared by or on behalf of the issuer of the investment fund or other investment product or vehicle. A financial advisor should be contacted to determine what may be best for your individual needs. The Rieger Report LLC is not a financial or tax advisor. A tax advisor should be consulted to evaluate the impact of any tax-exempt securities on portfolios and the tax consequences of making any particular investment decision. No legal relationship is created between you and Rieger Report LLC.
The Rieger Report LLC does not act as a fiduciary or investment advisor. While the Rieger Report LLC has obtained information from sources it believes to be reliable, the Rieger Report LLC does not perform any audit or undertake verification of any information it receives.
The Rieger Report Rankings and model portfolios are opinions of relative ranking among the peer group analyzed as of the date expressed and not statements of facts. Rieger Report model portfolios are intended for illustration only. Any opinion or analysis decisions are not to be construed as recommendations to purchase, hold or sell any securities or to make any investment decisions, and do not address the suitability of any security. The Rieger Report LLC does not assume any obligation to update the content in this publication in any form or format.
Your use of any information from this document or presentation is at your own risk and without recourse against Rieger Report LLC, its members, managers, or employees. To the maximum extent permitted by law, Rieger Report LLC disclaims any and all liability in the event any information, commentary, analysis, and/or opinions prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.Municipal Bond ETF Model Portfolio
Rebalance for Q1 2019
Click the above image to enlarge.