Gain High-Yield Corporate Bond Exposure with This Fund

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

The SPDR Bloomberg Barclays High Yield Bond ETF (JNK) tracks a market-weighted index of highly liquid, high-yield, U.S. dollar-denominated corporate bonds.

JNK seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Bloomberg Barclays High Yield Very Liquid Index. It is a cost-efficient way to implement a high-yield exposure, compared to individual bonds.

The exchange-traded fund (ETF), which rebalances its holdings on the last day of each month, is a hugely popular, liquid high-yield corporate bond fund. The ETF’s portfolio is one of the broadest in the segment. It charges a reasonable fee, but its tracking has been a bit sloppy at times, so investors may find the holding costs more than advertised.

The fund trades well, however, so it offers liquidity and has a huge asset base. JNK competes most directly with HYG, an iShares ETF by BlackRock that I featured in last week’s ETF Talk, which also is extremely large and liquid.

Heavily weighted in the United States (81.77%), the fund also is invested in Canada (4.88%) and the United Kingdom (3.17%). Its main two sectors are Industrial (74.08%) and Financial (21.64%). JNK’s overall portfolio composition consists of 98.76% bonds.

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The fund has more than $10 billion in assets under management, 895 holdings and an average spread of 0.01%. With an expense ratio of 0.40%, it is relatively inexpensive to hold in relation to other exchange-traded funds. It is listed on the NYSE Arca Exchange and has been around since November 28, 2007.

With a 5.55% yield, a monthly dividend distribution policy and a dividend increase of almost 5% year to date, JNK could be a good equity for investors looking to gain high-yield exposure in the bond market.

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However, as always, all interested investors are urged to conduct their own due diligence before deciding whether this fund suits their individual portfolios.

Rest assured, I remain as happy as ever to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk and you’ll know where it originated.

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