An investor's guide to ETFs and ETNs: A comparative study

Part 4
An investor's guide to ETFs and ETNs: A comparative study (Part 4 of 6)

Comparing same sector ETFs and ETNs: The price performance

It may be worth comparing an ETF and an ETN belonging to the same sector.

Price performance of DVHI vs IYLDEnlarge Graph

The chart above shows the performance of the DVHI ETN and the IYLD ETF, both belonging to the diversified portfolio, high current income objective category.

The UBS ETRACS Diversified High Income ETN (DVHI), which tracks the NYSE Diversified High Income Index, is a diversified portfolio ETN. Launched by UBS under their ETRACS brand name on September 18, 2013, the index looks to highlight income, while making sure that volatility isn’t too great. In terms of its product holdings, fixed income/preferred stock account for 40% of its portfolio, while equities make up the rest of the index it tracks.

The underlying index has its largest allocations going to the PowerShares Emerging Markets Sovereign Debt (PCY), iShares iBoxx $ High Yield Corporate Bond ETF (HYG) with holdings in Sprint Corporation (S), First Data Corp (FDC), and the Market Vectors High Yield Municipal Index ETF (HYD).

The iShares Morningstar Multi-Asset Income ETF (IYLD) seeks to replicate the Morningstar Multi-Asset High Income Index, a broadly diversified index, which seeks to deliver high current income while maintaining long-term capital appreciation. The index represents a product allocation strategy of 60% fixed income, 20% equity, and 20% alternative income sources.

The underlying index has its largest allocations going to the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), the iShares 20+ Year Treasury Bond ETF (TLT), and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB).

At the price performance level, the DVHI ETN compares well with the IYLD ETF, bringing out the fact that high yield ETNs are favored in the market as much as high yield ETFs.

The Realist Discussions