GLDX’s trailing 12-month yield was 5.40% as of November 30. While it might not seem like a high yield, it’s respectable compared to the zero percent yield provided by most precious metals ETFs.
Janus Henderson Securitized Income ETF (JSI)
Asset-backed securities (ABS) are another alt income source that offers attractive yields.
ETFs linked to the Bloomberg U.S. Aggregate Bond Index, like the iShares Core U.S. Aggregate Bond ETF (AGG), have minimal exposure to the higher yielding ABS market. This is largely due to the bias of the U.S. Aggregate Bond Index to corporate and government bonds.
Current yields for asset back securities are in the 7.5% to 8% range. Moreover, they represent a tiny slice—around 10%—of the massive $52 trillion fixed income market.
"Most investors are underweighted to this very large and attractive asset class, said John Kerschner, CFA and Head of U.S. Securitized Products at Janus Henderson Investors in a recent appearance on First Look ETF.
According to Kerschner, low market correlation to corporate debt and equities also provides diversification benefits.
The recently launched Janus Henderson Securitized Income ETF (JSI) offers exposure to collateralized loan obligations (CLOs), mortgage-backed securities (MBS) and commercial mortgage-backed securities (CMBS). Advisors looking for portfolio income enhancements should take note.
While income from traditional sources like stocks and bonds are here to stay, alternative income ETFs can enhance the overall income level and diversification of a portfolio. Furthermore, this year’s asset boom in these types of ETFs has solidified their place as bonafide choices for income investors.
As advisors help familiarize their clients with these opportunities, the ETF market for income focused funds looks poised for more asset growth ahead.