Guggenheim has bridged the gap between single bonds and the convenience of a bond exchange traded fund, giving investors liquidity, diversification and consistency.
"We have had tremendous reception with our BulletShares suite. They represent the best of both worlds - the characteristics and maturity of a single bond, and the diversification benefits of a single bond fund," said Anthony Davidow, managing director and portfolio strategist at Guggenheim Investments. "BulletShares are ideal solutions for advisers seeking to manage life events such as retirement, college or a new home."
With target-date maturity ETFs, the bonds all mature at the same time and when maturity is hit, the fund closes and returns all investment capital to shareholders just like an individual bond would. Timothy Strauts for Morningstar reports that target-date maturity bond investments are an evolution to fixed-income investing.
The goal of a target-date maturity fund is to give investors the diversification and liquidity benefits of several bonds, but still capture the same return of principle of a single bond. Initially, growth in this sector of the bond market is expected to be slow, but should catch on as investors realize the benefits.
Guggenheim/BulletShares has also added high-yield corporate bonds to their target-date maturity line-up. Corporate bonds are denoted high-yield for the sole reason that firms issuing them are highly leveraged, according to Morningstar analysts.
With this increased leverage comes the increased probability of default and bankruptcy. Overall, risk equals return, and the high yield of these bonds is designed to compensate investors for this risk.
A sample from the Guggenheim suite of Target-Maturity ETFs:
- Guggenheim BulletShares 2012 Corporate Bond ETF (NYSEARCA:BSCC)
- Guggenheim BulletShares 2013 Corporate Bond ETF (NYSEARCA:BSCD)
- Guggenheim BulletShares 2014 Corporate Bond ETF (NYSEARCA:BSCE)
Tisha Guerrero contributed to this article.
Read the disclaimer: Tom Lydon is a board member of the funds for Guggenheim Investments.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.