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‘New Breed’ Income ETFs for a Low-Yield Market


“Multi-asset” funds designed to deliver income and stability such as SPDR SSgA Income Allocation ETF (INKM) are an important developing trend in the ETF business.

“Such ETFs are a new breed. In the past, ETF developers favored increasingly narrow slices of the securities markets.” Bloomberg News reports. “The State Street ETF turns that model on its head. It is one of a handful of so-called multi-asset income ETFs that offer a one-size-fits-all solution for income-hungry investors.”

Multi-assets ETFs are still small in number and have not attracted much investor attention, says Morningstar analyst Patricia Oey. [Multi-Asset ETFs For Yield and Stability]

“These ETFs, as one-stop funds for diversified income exposure, seek to address investors’ need for higher and potentially more stable income,” she wrote in a recent report.

The funds “invest across a number of ‘income’ asset classes, such as U.S. and foreign dividend-paying equities, REITs, Master Limited Partnerships, high-yield bonds, and emerging-markets debt,” Oey explains.

Some multi-asset ETFs are passive index products, while others are actively managed.

“These funds could be attractive to income-oriented investors who tend to be more overweight traditional income securities, such as utilities, and safer lower-yielding bonds,” the Morningstar analyst wrote.

Other ETFs for the category include Guggenheim Multi-Asset Income ETF (CVY), iShares Morningstar Multi-Asset Income Index Fund (NYSEarca:IYLD) and Arrow Dow Jones Global Yield (GYLD).

“We have to be a little bit more creative in finding places to generate income,” financial planner Brent Emerick said in the Bloomberg report.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.