U.S. convertible bonds fueled top-performing returns for one fund.
This year has been a very challenging one for bond investors, with compressed rates pressuring income potential, and monetary policy casting a shadow on long-dated debt.
In turn, most have turned to short-term bond funds. Many investors have replaced interest-rate risk for credit risk with the idea that the only fixed-income funds delivering significant returns are high-yield products
Below, we list the top three best-performing fixed-income ETFs in a list that excludes leverage and inverse strategies, which tend to skew the data. After all, it’d be hard to compare any bond fund’s performance with a triple-inverse bet against long-dated Treasurys, such as the PowerShares DB 3X Short 25+ Year Treasury Bond ETF (SBND), which is up 41.6 percent this year.
3. The iShares Global ex USD High Yield Corporate Bond ETF (HYXU | C) is up 9.22 percent year-to-date.
HYXU tracks an index comprising ex-U.S. dollar, high-yield bonds from developed markets, offering exposure to nondollar-denominated high-yield debt.
The fund focuses heavily on bonds tied to the industrial and consumer goods sectors. While it taps into several countries, most of the fund is invested in securities denominated in euros. That makes it largely a bet on high-yield debt issued by firms in the eurozone, and one that’s sensitive to fluctuations in the euro, according to IndexUniverse ETF Analytics.
HYXU is mostly a midterm debt fund with a weighted-average maturity of 4.76 years in a mix that has a yield to maturity of 5.3 percent.