The Principal Active High Yield ETF (YLD) is an exchange-traded fund (ETF) that provides income through exposure to global equities, investment-grade and high-yield debt, mortgage-backed securities (MBS)/asset-backed securities (ABS), preferred stock, master limited partnerships (MLPs) and real estate investment trusts (REITs).
I like that the ETF with $107 million in assets is actively managed and seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets, plus any borrowings for investment purposes, in below-investment grade (also known as “junk” or “high yield”) fixed-income securities. Such securities include bonds and bank loans.
Specifically, YLD invests in U.S. Treasury bills, bonds and other obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities. The ETF also can offer exposure to investment-grade bank loans (also known as senior floating rate interests), and preferred securities.
YLD’s share price, as of this writing, trades around $18, giving it an impressive 6.46% dividend yield. Its expense ratio is 0.39%, meaning it is relatively inexpensive to hold in relation to other exchange-traded funds.
This fund is a truly active ETF because its portfolio manager has broad leeway to invest across asset classes and geographic boundaries in search of income, unlike active ETPs with index-based strategies. The portfolio manager vaguely provided selection criteria for eligible securities such as economic factors, credit spreads, investor sentiment and momentum.
The fixed-income component may include corporate and sovereign debt, investment-grade and high-yield debt, convertibles, preferred stock, mortgage securities and floating-rate instruments. The manager faces no exposure limits of any kind, other than those mandated by RIC compliance.
With any new opportunity, potential investors should conduct their own due diligence in deciding whether or not this fund fits their own individual investing needs and portfolio goals.
I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You may just see your question answered in a future ETF Talk.