More large investors are turning to liquid high-yield ETFs to trade speculative-grade debt rather than buying and selling the actual bonds.
High-yield ETFs have gathered $26.7 billion in assets since they first listed five years ago, according to Bloomberg.
High-yield ETFs are attracting a record volume of institutional investors, with the buyers accounting for 52% of HYG and 62% of JNK, according to the report.
HYG, which is managed by BlackRock’s iShares, holds assets of $13.9 billion. State Street oversees JNK, which holds $10.3 billion.
“As trading becomes more difficult in the bonds, people will say trading in ETFs is more efficient,” said Chris Hempstead, director of ETF execution at WallachBeth Capital, in the Bloomberg story. “By trading the ETF, you’re transferring the onus for trading the bonds onto someone else.”
Trading volume in HYG and JNK has risen 22% above the six-month average while overall trading for the debt has declined 9%, according to the article.
SPDR Barclays Capital High Yield Bond ETF
Full disclosure: Tom Lydon’s clients own HYG.