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Helios Advantage Income (NYSE:HAV), Helios High Income Fund (NYSE:HIH) Helios Strategic Income Fund (NYSE:HSA) and Helios Multi-Sector High Income Fund (NYSE:HMH) are diversified, closed-end management investment companies that invest in below investment grade (i.e. junk) bonds. This article will compare these funds with two popular high yield ETFs – SPDR Barclays Capital High Yield Bond (NYSEARCA:JNK) and iShares High Yield Corporate Bond Fund (NYSEARCA:HYG).

1. Yield

HSA

HMH

HIH

HAV

JNK

HYG

7.71

8.92

9.27

9.27

7.53

7.22

All four Helios funds as well as JNK and HYG pay monthly dividends. However, the yield of all four Helios funds is greater than either JNK or HYG. Specifically, the yield on both HAV and HIH is 205 and 174 basis points higher than JNK and HYG, respectively.

2. Discount to Net Asset Value

HSA

HMH

HIH

HAV

JNK

HYG

-13.63%

-7.72%

-4.07%

-8.70%

0.85%

1.31%

The Helios funds trade at varying discounts to net asset value (NAV) ranging from -4% to -13%. Conversely, the market price of both JNK and HYG trade at a slight premium to NAV. Any dividend reinvestment performed with the Helios funds is done so at a significant discount.

3. Credit Quality

quality

HSA

HMH

HIH

HAV

JNK

HYG

A/cash

3.0

5.0

5.0

0.0

0.0

1.1

BBB

32.0

3.0

4.0

2.0

2.1

1.3

BB

8.0

17.0

17.0

17.0

34.8

41.5

B

38.0

57.0

56.0

55.0

48.1

41.2

below B

19.0

18.0

18.0

26.0

15.0

14.9

HMH, HIH, and HAV feature slightly lower credit quality when compared with both JNK and HYG. HSA, however, features better credit quality as evidenced by the 32% allocation at BBB. The BBB allocation for JNK and HYG is at 2.1% and 1.3%, respectively. It should be noted that HSA has better credit quality and a higher yield relative to JNK/HYG. While HMH, HIH, and HAV have slightly poorer credit ratings, the increased yield more than compensates for the risk.

4. Expenses

HSA

HMH

HIH

HAV

JNK

HYG

2.14

2.18

1.12

1.15

0.40

0.50

The Helios funds have expense ratios greater than both JNK and HYG. Both HIH and HAV have lower expense ratios when compared with HSA and HMH.

Conclusion

The Helios high-yield funds represent a nice alternative to either JNK or HYG. These funds provide the investor with an increased yield, discount to NAV, and comparable credit quality when compared with the popular junk funds. The one black eye with these funds is their larger expense ratios. I believe, however, that the aforementioned benefits, especially for HIH and HAV, more than compensate for the increased expense ratios.

Disclosure: I am long HSA, HAV, HIH.

Source: High-Yield Bond Fund Alternatives