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Guggenheim Launches Investment-Grade Corporate Bond ETF

Zacks Equity Research
Kimberly-Clark (KMB) delivered earnings and revenue surprises of 4.27% and 1.30%, respectively, for the quarter ended September 2018. Do the numbers hold clues to what lies ahead for the stock?

Guggenheim has launched a new fixed-income fund focused on providing exposure to the investment-grade corporate bond space.


Guggenheim BulletShares 2027 Corporate Bond ETF (BSCR) tracks the NASDAQ BulletShares USD Corporate Bond 2027 Index.


Fund Characteristics


The fund seeks to provide exposure to U.S. dollar-denominated, investment-grade corporate bonds that are set to mature by 2027. It has AUM of $6 million and seeks to provide cheap exposure to the highly rated corporate bond space. It charges 24 basis points as fee per year and holds 46 investment-grade bonds in its portfolio. It bears concentration risk as over 30% of assets are allocated to the top 10 holdings.


From a sector look, Banking, Consumer Non-cyclical and Technology are the top three allocations of this fund, with 27.3%, 13.6% and 11.5% exposure, respectively.


From a credit-rating perspective, the fund has 36.5% exposure to BBB rated bonds, 50.4% to A rated bonds, 9.3% to AA rated bonds, 3.6% to AAA rated bonds and 0.2% to Cash. Therefore, due to its investment-grade focus, the fund bears negligible default risk.


Moreover, in its September meet, the Fed announced plans of curtailing its $4.5 trillion balance sheet beginning October and signaled a rate hike by the end of this year. This fund is expected to be significantly impacted owing to its long-term focus.


Moreover, the current favorite to lead the Fed, Kevin Warsh, is seen as less dovish and a friend of the administration, who is expected to expedite the process of deregulation and further rate hikes if he assumes the position currently held by Janet Yellen.


Competition


The fund faces a lot of competition from other investment-grade corporate bond funds. Below we discuss a few ETFs that seek to provide exposure to this corner (see all Investment Grade Corporate Bond ETFs here).


Vanguard Long-Term Corporate Bond ETF VCLT


This fund has AUM of $2.1 billion and seeks to provide exposure to investment-grade corporate bonds. It charges 7 basis points in fee per year and holds 1721 bonds in its portfolio. From a sector look, Industrial, Finance and Utility are the top three allocations of this fund, with 70.5%, 17.4% and 11.6% exposure, respectively (as of Aug 31, 2017). The fund targets the long end of the yield curve as it has a weighted average maturity of 23.6 years and an effective duration of 14.2 years. The fund has returned 5.3% year to date but has lost 0.4% in a year (as of Oct 5, 2017).


SPDR Bloomberg Barclays Long Term Corporate Bond ETF LWC


This fund has AUM of $239 million and seeks to provide exposure to investment-grade corporate bonds. It charges 12 basis points in fee per year and holds 1501 bonds in its portfolio. From a sector look, Industrial, Finance and Utility are the top three allocations of this fund, with 71.4%, 17.1% and 11.8% exposure, respectively (as of Oct 4, 2017). The fund targets the long end of the yield curve as it has an average maturity of 23.78 years and option-adjusted duration of 14.24 years. The fund has returned 5.2% year to date but has lost 0.8% in a year (as of Oct 5, 2017).


PIMCO Investment Grade Corporate Bond Index Exchange-Traded Fund CORP


This fund has AUM of $814.4 million and seeks to provide exposure to investment-grade corporate bonds. It charges 20 basis points in fee per year and holds 436 bonds in its portfolio. From a sector look, Investment Grade Credit, Emerging Markets and Net Other Short Duration Instruments are the top three allocations of this fund, with 92.5%, 4.6% and 2.9% exposure, respectively (as of Aug 31, 2017). The fund targets the intermediate end of the yield curve as it has an effective maturity of 10.21 years and effective duration of 6.98 years. The fund has returned 3.2% year to date but has lost 0.2% in a year (as of Oct 5, 2017).


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VANGD-LT CRP BD (VCLT): ETF Research Reports
 
SPDR-BBC LT CRB (LWC): ETF Research Reports
 
PIMCO-IG CRIETF (CORP): ETF Research Reports
 
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