It doesn't look like the search for yield is going away anytime soon. Even after the Federal Reserve hiked its overnight rate three times in the past six months, yields on long-term Treasuries and other high-quality bonds have barely budged, remaining at historically depressed levels.
At least for now, investors looking for higher yields can't just plop their money into the iShares Core U.S. Aggregate Bond ETF (AGG) and call it a day; they have to stretch into other areas to find them. Fortunately, there's a host of income ETFs on the market that help investors do just that, including a number of products that launched just this year.
Here we take a look at several of those new launches:
Master limited partnerships (MLPs) are pass-through entities like real estate investment trusts (REITs). Like REITs, MLPs are well-known for their high yields. These companies—which primarily operate energy infrastructure such as pipelines and storage facilities—were battered during the oil crash of the past few years amid fears they'd have to cut their distributions.
While some MLPs have reduced their payouts, the vast majority continue to maintain or even grow their distributions, providing an income opportunity for investors who can stomach the wild swings that MLP share prices often see.
There are plenty of established MLP exchange-traded products on the market, but a pair of newcomers arrived just this year as well. The Cushing 30 MLP Index ETN (PPLN), which launched earlier this month, tracks an equal-weighted basket of 30 MLPs. It's got a yield of 6.71%, according to the index website.
Meanwhile, the Amplify YieldShares Oil Hedged MLP Income ETF (AMLX) puts a new spin on the industry by simultaneously holding a basket of MLPs while shorting crude oil futures. The fund holds a long position on 20 equal-weighted MLPs (chosen based on their distribution yields), and a short position on crude oil futures equal to 40-100% of the value of its long position.
The result is MLP exposure that's hedged against movements in oil prices.