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NEW YORK (MarketWatch) - Investors' hunger for income, which has driven billions of dollars of assets into dividend-focused funds, is now bringing forth a new investment product: multi-asset-class income vehicles.
HGI and CVY have been out for a while - both are multi-asset income funds, the former global, the latter US. While not to say that the above funds won't do well, neither of these has exactly what I would call a tremendous record. The one I do like - and recommend - would be the Principal Global Dividend Fund (PGDCX, or whatever share class one likes.)
The thing that I find quite concerning is the selling of "yield" that ignores risks. I'm not saying that the above article does so, but as I noted yesterday, someone on CNBC called MLPs "defensive", which I found hilarious, as despite their high yields, they are highly volatile and anything but defensive.
Yes, that's true about HGI and CVY - although I should mention that both are quite stock heavy - so there's definitely wide variances of allocations in this category whereby some are much more stock heavy and some have low stock allocations. These 3 newer ETFs mentioned in the article have much more moderate/conservative allocation to equities.
But yes regarding MLPs - the article mentioned this...
"However, you must be comfortable with the types of investments being combined. For example, another MarketWatch columnist recently warned against master limited partnerships unless you have the capability of analyzing the risks. That is excellent advice for picking individual MLPs; the Arrow fund offers a diversified, equally weighted selection, but whether that is a sufficient safety net is up to you. Read more: MLPs offer high-yield, big risks."
It's an ETF that holds a bunch of income-oriented CEFs (just over 100) with global exposure including Bond CEFs, Hi-Yield Bond CEFs, Preferreds and Option Income CEFs. Embedded in some of these CEFs are some dividend-paying stocks and so there is some stock exposure as well. SEC Yield is just over 8%.
One more thing about CVY that I got reminded about from an M* user --- one of the reasons why it doesn't have a tremendous record as noted is because CVY used to be called the "Claymore Yield Hog" ETF and was heavily stock-oriented. It got battered hard in 2008 just like other dividend-focused funds (e.g. DVY). And I think when Guggenheim took over was when the name changed to "multi-asset."
HGI has some "multi-asset" in it to barely even be able to call it that as I believe it's still very heavily stock-oriented (90%).
The other 3 new ETFs to me are truly more of an "multi-asset" allocation style.
Comments
The thing that I find quite concerning is the selling of "yield" that ignores risks. I'm not saying that the above article does so, but as I noted yesterday, someone on CNBC called MLPs "defensive", which I found hilarious, as despite their high yields, they are highly volatile and anything but defensive.
But yes regarding MLPs - the article mentioned this...
"However, you must be comfortable with the types of investments being combined. For example, another MarketWatch columnist recently warned against master limited partnerships unless you have the capability of analyzing the risks. That is excellent advice for picking individual MLPs; the Arrow fund offers a diversified, equally weighted selection, but whether that is a sufficient safety net is up to you. Read more: MLPs offer high-yield, big risks."
Master limited partnerships: High yield, big risks
http://www.marketwatch.com/story/master-limited-partnerships-high-yield-big-risks-2012-05-16
Another interesting CEF, is PCEF by Powershares. Here's a recent article about it by M*:
http://news.morningstar.com/articlenet/article.aspx?id=553034
It's an ETF that holds a bunch of income-oriented CEFs (just over 100) with global exposure including Bond CEFs, Hi-Yield Bond CEFs, Preferreds and Option Income CEFs. Embedded in some of these CEFs are some dividend-paying stocks and so there is some stock exposure as well. SEC Yield is just over 8%.
HGI has some "multi-asset" in it to barely even be able to call it that as I believe it's still very heavily stock-oriented (90%).
The other 3 new ETFs to me are truly more of an "multi-asset" allocation style.