Van Eck's Market Vectors has launched a new exchange traded fund that targets a virtually untapped area of the high yield market. Based on other funds currently trading on the U.S. market, this area of high yield is underrepresented in many portfolios.
"Our research has shown that for many investors the current allocation to corporate high-yield debt may miss as much as 35% of the global high-yield market," Edward Lopez, Market Vectors' Managing Director said. "That underexposure may be especially important as international corporate high-yield bonds currently offer higher yields as well as historically lower default rates than similar debt instruments issued in the U.S."
Market Vectors International High-Yield ETF (NYSEARCA:IHY) tracks a Merrill Lynch index of speculative-grade corporate bonds excluding U.S. issuers. Instead, it consists of 1,008 debt issues of 546 corporations from 69 countries, including a 26.5% allocation to emerging market bonds.
"In today's persistent low yield environment, investors continue to search the globe for new sources of income," Francis Rodilosso, one of the funds' portfolio managers, said. "With IHY, we have created an income-oriented ETF that, by tracking its index, may offer high-yield diversification, a high level of potential income and exposure to issuers worldwide that may experience more robust economic growth than the United States."
Tisha Guerrero contributed to this article.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.