It’s no exaggeration to say that this has been a year of ups and downs for the old 60/40 portfolio. However, investors may be buoyed by increased flows into corporate bonds last month. With $3.6 billion in inflows into the corporate bond ETF category in one month, about half of the $6.3 billion in flows this year, investors should: American Century Diversified Corporate Bond ETF (KORP).
There is also concern that interest rates make corporate bonds too risky, but hedge funds are jumping in because they see a big drop in bond prices across the board based on those risks. This may also explain the thinking behind the recent increase in flows. In what has been a particularly difficult year for bonds, his fund manager has recently been trying to lure investors back to active his fund’s bonds.
KORP is actively managed and appears to hold for a period of 5 to 7 years. The ETF invests primarily in investment grade bonds, with a significant portion of its portfolio also diversified in risky junk rated bonds. A diversified approach to bonds gives you the opportunity to return higher yields. This could be an interesting play in such a volatile rising inflation environment.
Investors looking for dividends can also find them on KORP, which currently has an annual dividend yield of 3.05%, above the ETF database category average of 1.8%. KORP itself received $24.4 million in net inflows in one month, returning 3% in one month compared to -3.1% in three months.
KORP currently has the US dollar as its largest holding at 2.8%, with Verizon (VZ) and HSBC Holdings (HSBC) bonds at 1.3% respectively in second and third positions.
Advisors and investors alike are looking for bonds in a year of volatility across markets, from the recent turmoil in the cryptocurrency market to inflation and geopolitical risks. These investors are advised to follow corporate bond ETFs. Like KORP in the coming weeks if corporate bond flows continue to rise and the recession potential doesn’t materialize.
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