New Multi-Asset Income ETFs

May 11, 2012

The quest for yield has inspired three new multi-asset income funds in as many weeks.

That roughly doubles the number of ETF offerings in the multi-asset income space.

The driving idea is simple: If you need income, why immediately constrain yourself to just dividends from stocks or coupons from bonds right off the bat?

Instead, consider the broad range of assets that spin off cash flows. Then you can decide what’s appropriate given your risk preferences, your level of comfort with less common asset types, and how these funds might look with the rest of your portfolio.

The new funds are the Arrow Dow Jones Global Yield (NYSEArca: GYLD), the actively managed SPDR SSgA Income Allocation (NYSEArca: INKM) and the iShares Morningstar Multi-Asset Income (BATS: IYLD).

Exposure

Comparing the different asset types across the funds isn’t easy.

I took a stab at creating a level playing field by assigning all the assets involved into common buckets. Two caveats apply. First: Holdings may change—especially for actively managed INKM. Second: I used index constituents for GYLD since fund holdings were not available initially. (Holdings were posted 5/11.)

That said, the funds’ current mixes show some real differences.

 

GYLD

Arrow’s GYLD and SSgA’s INKM share similar debt allocations (about 40 percent), but GYLD holds far fewer equities, instead reaching for large helpings of real estate (including REITs) and master limited partnerships (MLPs). REITs and MLPs are pass-through structures that spin off income by design.

INKM

 

iShares’ ILYD meanwhile strongly favors debt in its portfolio (61 percent), rounded out with equities (19 percent) and a good chunk of preferred stocks (15 percent). Preferred stocks act more like bonds given their fixed cash flows and corresponding interest rate risk.

 

IYLD

 

These pie charts provide the broad contours of each of the funds’ exposure. The table below shows a parsing of assets that’s one notch finer.

 

Find your next ETF

Reset All