Short-dated, high-yield and alternative-income ETFs proved popular this year.
In a year where long-dated Treasury bond funds were largely out of favor due to prospects for higher interest rates ahead, it’s no surprise that ETFs tapping into other pockets of the bond market shined at the expense of the more traditional Treasury exposure.
Among them, ETFs focused on short-dated debt, high-yield bonds and income alternatives like floating rate bonds were hugely popular either for the interest-rate-risk protection they offer, or the for the juicy yields they provide.
Below are the five most popular fixed-income ETFs of 2013 in terms of assets under management, excluding leverage and inverse strategies, in ascending order.
5. The Vanguard Short-Term Corporate Bond ETF (VCSH | A-55) gathered $2.65 billion in new assets this year.
VCSH is a short-term corporate bond fund that tracks a market-weighted index of investment-grade fixed-rate corporate bonds with maturities between one and five years.
Compared with the broader segment, the fund serves up a tad more exposure to interest-rate risk due to its longer weighted average maturity of roughly three years. That translates into a slightly better yield to maturity, currently 1.6 percent, according to IndexUniverse ETF Analytics.
The highly liquid fund offers exposure that’s heavily tilted toward U.S. companies, with three-quarters of the portfolio allocated domestically. The remainder is split between Australia, Canada, Japan and various European countries. Industrial-sector bonds and financials comprise more than 90 percent of the portfolio.
VCSH has roughly $7 billion in total assets under management, and costs 0.12 percent in expense ratio—or $12 per $10,000 invested a year. Year-to-date, the fund has seen total returns of 1.4 percent.