In case you missed it the bond ETF market has proliferated with a slew of offerings covering many, but not all, segments.The utility here is that accessing individual bonds can be tough for do-it-yourselfers in terms of friendly pricing or in terms of proper analysis for certain types of corporate or muni bonds.
The bigger picture of course is an old theme which is investment products evolving to allow ever more thoroughly diversified portfolios.
One of the newer funds is the iShares
A broader fund that has been around for a while is the iShares (still) Lehman Government/Credit Bond Fund (GBF) which has been around for a while, is relatively short, has been yielding in the fours of late and is comprised of 38% treasuries, 19% agencies, 16% industrials, 13% financials and a few smaller ones from there.
One you may find along the way is the iShares Lehman MBS Fund (MBB). Similar to AGZ a lot or mortages (obviously) but the difference is that AGZ is backed by the full faith and credit of the US government where as MBB is backed by the assets.
One last one to mention is the iShares Lehman Credit Bond Fund (CFT) which focuses on corporates with a 39% weight in industrials and a 33% weight in financials. If you look at this one you'll see it has been on a wild ride. I'm not sure what weight financials used to have but there are quite a few issues in the fund trading in the 80's or lower.
I would like to see a convertible bond ETF and a developed foreign bond ETF (they have been filed for). A convertible bond ETF would have been hit hard in the meltdown but I think it would have done better than the CEFs.
I am still convinced that equities are by far the best shot at having a financial plan work but I also can see the psychological need to allocate more to lower octane investments like fixed income is supposed to be.
Last night we got around to watching Whale Wars in the Tivo. It is on Animal Planet on Friday nights. Holy crap, it is wild. Trust me, tape the show and watch it.
17 comments:
You constantly have a wish list of new ETF's you would like to see. Personally as this bear continues I think people will desire fewer and fewer funds.
I understand the benefits of diversification, but I see less and less need for illiquid funds.
Just an interesting observation. A quick scan of closed-end funds in Monday's WSJ showed just about all of them trading at a discount well below NAV.
Is there a free-lunch there or is something else at play. By free-lunch, I mean can one reap the gain as the fund returns to NAV in addition to the yield.
I'm guessing ETFs don't normally trade at a premium/discount to the underlying NAV.
i meant to mention the low volume. if no one talks about these funds then they will always have low volume.
MBB and gbf have small premium, CFT has a big one. Indexuniverse covered this, one of the distortions of the credit crisis. the diff between for many funds was much larger a few weeks ago. i would suspect it will normalize fairly soon, probably already is normalizing.
Roger, could you comment on preferreds? Like everything, they've been taken to the cleaners. The etfs and cefs hold at least some financial preferreds which scares me off, but some of the individual issues are yielding double the 10 year with an equity kicker. Thanks very much.
nothing wrong with preferreds of companies that will survive. my sggestion would be to not think about yield. they are all down a lot. pick a company you think will make it. i would avoid funds in this space.
While most asset classes can be nicely handled with one or more ETFs, I happen to believe bonds are one area where active investment is called for. As good as the Lehman (Barclays) Agg might be, it can't be superior to what a Loomis Sayles or PIMCO could do. (I'm specifically thinking of something open-ended, like PUBDX.) Am I just wrong?
barron's mentioned a loomis and sayles fund managed by dan fuss having been crushed this year.
Roger: "I would like to see a convertible bond ETF and a developed foreign bond ETF (they have been filed for)."
I'm sure you are aware of BWX which is a developed, local currency, foreign treasury bond ETF. So what exactly is it that you'd like to see; more of these, foreign corporates?
I have BWX in a few accounts. It is heavy in Japan. LOnger term I'd rather not have a lot of Japan.
Roger,
Agree re BWX and Japan but you didn't answer my question. What are you looking for/expecting ("...they have been filed for"); regional, single country?
Why are you so anti japan?
They had these problems 15 years before us. We and others seem to be turning Japanese.
In the non to distant future I think Japan will look wonderful compared to those countries heading into deflation.
that thought might turn out to be right but i'm sure you know that people having been saying the same thing every year for many years. it's been right twice that i know for a short period of time.
Exactly. It's not a matter of being anti-Japan. It's a matter of "japan just goes nowhere."
I enjoyed reading a couple of years ago about how Japan was the great place to invest becuase Japan funds had 1 year of positive return.
Great post - I think we all need some diversification now and these ETF's are good suggestions.
Great video of Buffett discussing Japan and how the companies don't care about return on equity.
http://www.5min.com/Video/Warren-Buffett---Insight-on-Japan-11337
Yes, but what I think you do not realize is WE will be Japan in the future and Japan will be in recovery.
I think "Japan will be in recovery" is an analyst quote from 1990 when I got out of school.
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