Stocks have been on an absolute tear this week with major U.S. equity benchmarks soaring to all-time highs amid renewed stimulus hopes. Bullish momentum permeated the marketplace on Wednesday after the Federal Reserve surprised many with its decision to hold off from scaling back on bond-repurchases this time around; as a result, cyclical securities have been rallying because of the continuation of the Fed’s “accommodative” monetary policy [see also 101 High Yielding ETFs For Every Dividend Investor].
Amid the rally, UBS expanded its ETN suite with a dividend-focused offering; the ETRACS Diversified High Income ETN (DVHI) began trading on September 19th, 2013.
Diversified High Income ETN Hits The Street
The new ETN is linked to the NYSE Diversified High Income Index, which looks to track the performance of a diversified basket of 138 publicly-traded securities that historically pay significant dividends or distributions. The underlying benchmark is split roughly 60/40 between stocks and bonds, while a number of the components are actually ETFs – including the PowerShares Emerging Markets Sovereign Debt Portfolio (PCY, B+) and the iShares iBoxx High Yield Corporate Bond ETF (HYG, A) [see our Monthly Dividend ETFdb Portfolio].
DVHI’s equity component focuses on:
- Business Development Companies
- Energy MLPs
- Mortgage REITs
- Dividend paying equities (domestic & foreign)
Digging deeper, the ETN’s fixed-income component is made up of:
Meet the Competition
DVHI joins the Diversified Portfolio ETFdb Category, which is made up of over 20 ETPs with an average expense ratio of 0.85%; this places DVHI in the middle of the group’s cost-spectrum, seeing as how the new offering charges 0.84% in annual fees. This ETN will face some stiff competition from more established players in the space, including:
- First Trust Multi-Asset Diversified Income Index Fund (MDIV, A+) with over $480 million in assets under management
- iShares S&P Growth Allocation Fund (AOR, A) with over $200 million in AUM
- iShares S&P Moderate Allocation Fund (AOM, A) with over $185 million in AUM
- iShares S&P Aggressive Allocation Fund (AOA, A-) with over $180 million in AUM
- iShares S&P Conservative Allocation Fund (AOK, A) with nearly $135 million in AUM
- State Street SPDR Income Allocation ETF (INKM, A-) with over $105 million in AUM
- iShares Multi-Asset Income ETF (IYLD, A) with over $105 million in AUM
DVHI warrants a closer look under the hood from anyone looking to beef up their portfolio’s current-income stream while at the same time diversifying across multiple asset classes.
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Disclosure: No positions at time of writing.
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