Guggenheim launched a new fixed income fund focused on providing exposure to the high-yield space. 

Guggenheim BulletShares 2025 High Yield Corporate Bond ETF (BSJP) tracks the NASDAQ BulletShares USD High Yield Corporate Bond 2025 Index and holds a portfolio of bonds that have an effective maturity in 2025.

Fund Characteristics

The fund’s index seeks to measure the performance of U.S. dollar-denominated high-yield maturity targeted bonds in the corporate bond space. It has AUM of $5.0 million and has a moderate expense ratio of 42 basis points a year. It holds 31 junk bonds in its portfolio. The fund bears significant concentration risk as more than 47.3% is allocated to the top 10 holdings.

From a sector look, Consumer non-cyclical, Energy and Industrials are the top three allocations of this fund, with 18.0%, 18.0% and 13.8% exposure, respectively (as of Aug 31, 2017). 

From a credit rating perspective, the fund has 50.5% exposure to BB rated bonds, 36.9% to B rated bonds, 10.8% to CCC rated bonds, 1.2% to BBB rated bonds and 0.5% to Cash. Therefore, due to its high yield focus, the fund bears default risk. However, it seeks to invest in the higher end of the junk bond space.

Moreover, the fund targets the intermediate end of the yield curve, as it seeks to invest in bonds with effective maturities in 2025. Therefore, the fund bears interest rate risk.

Per latest news reports, President Donald Trump is said to be more inclined toward Federal Reserve Governor Jerome Powell to replace Janet Yellen as the Fed chair when her term expires in February 2018. The markets breathed a sigh of relief on this report, as Powell is seen as a candidate who will not steer much from the current Fed policy. This has instilled a sense of stability in the markets.

However, there is still a lot of uncertainty with regard to the next Fed chair, as polls predict a close fight. If Kevin Warsh or John Taylor end up on the hot seat, a faster rate hike policy might be enacted, as both the candidates are seen to be more hawkish.

Print Friendly, PDF & Email