Tag Archives: zacks funds

Junk Bond ETF ANGL Soaring: Will Its Flight Last?

Heightened volatility is driving investors to safe havens, making 2016 the year of the bond market. While long-term bonds are the undisputed winners, the high yield corner has drawn attention over the past three-months on investors’ drive for higher yields and a rebound in oil price. In addition, high-yield spreads have tightened significantly from 8.64 on February 12 to 6.36 currently, as per the BofA Merrill Lynch US High Yield Option-Adjusted Spread , making junk bonds attractive. This suggests that investors are now demanding lower premium than comparable Treasury bonds to compensate for the risk. However, the risk of default is on the rise, dampening the appeal for junk bonds. This is because the resumption of the slide in commodity prices and renewed global growth concerns are weighing on companies’ profits and balance sheets yet again. As per Moody’s Investors Service, global junk bond defaults will accelerate to 5% by the end of November, up from the previous forecast of 4.6% one month ago, and 3.8% in March. Fitch Ratings expects high yield bond defaults to climb to 6% this year from 4.5% last year and touch the highest level since 2000 (read: Junk versus Investment Grade Corporate Bond ETFs ). Given the heightened credit risk and low rate environment, investors thronged the high yield quality fund – VanEck Vectors Fallen Angel High Yield Bond ETF (NYSEARCA: ANGL ) . The fund gained 12.3% in the year-to-date time frame, outperforming the broad bond fund (NYSEARCA: BND ) and junk bond fund (NYSEARCA: JNK ) by wide margins. ANGL in Focus This ETF seeks to track the performance of the BofA Merrill Lynch US Fallen Angel High Yield Index, which focuses on the ‘fallen angel’ bonds. Fallen angel bonds are high yield securities that were once investment grade but have fallen from grace and are now trading as junk bonds. This unique approach gives the portfolio 248 securities that are widely spread across them, with none holding more than 1.65% of assets. The fund has an effective duration of 5.67 years and year to maturity of 9.33. Additionally, the product mainly comprises BB and B rated corporates, which together make up for 85.3% of the asset base. Bonds from energy and material sectors occupy the top two positions with 25.2% and 22.1%, respectively, while financial and communications round off the top four with double-digit allocation (read: all the High Yield Bond ETFs here ). ANGL has amassed $158.7 million in its asset base while trades in moderate volume of 82,000 shares a day on average. It charges a relatively low fee of 40 bps per year from investors and yields 5.20% per annum. Behind The Success of ANGL The fallen angels strategy is immensely successful this year as the number of fallen angels has increased substantially on a series of debt downgrades among energy and material firms – the top two sectors of the ETF. In this regard, Moody’s snatched investment grade ratings from 51 companies and gave them the junk status at the end of the first quarter, up from eight in the fourth quarter and 45 for the whole of 2015. These downgrades have boosted the performance of the ETF as bond price generally rebounds after losing an investment grade rating. Additionally, the rebound in oil prices from the 12-year low reached in mid-February injects further strength into these bonds and the ETF. As a result, fallen angels bonds tend to have lower default rates than their more traditional junk bond counterparts, thus offering better risk-reward profiles. These have a history of outperformance in nine out of the last 12 calendar years, according to Market Vectors. Moreover, the outperformance of ANGL was spurred by its higher average credit quality as about three-fourths of the portfolio carry the upper end rating (BB) of the junk category, leaving just less than 4% to the risky CCC-rated and lower. Link to the original post on Zacks.com

4 Top-Ranked Invesco Mutual Funds To Bet On

With nearly $792.4 billion of assets under management, Invesco Ltd. (NYSE: IVZ ) offers financial solutions through a diverse set of investment vehicles across major equity, fixed income, and alternative asset classes. This leading global investment management company caters to a wide range of mutual funds including both equity and fixed income funds, and domestic and international funds. With nearly 750 investment professionals and more than 6,000 employees, the company offers financial services worldwide through offices in 20 countries. Below we share with you four top-rated Invesco mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. To view the Zacks Rank and past performance of all Invesco mutual funds, Investors can click here to see the complete list of Invesco funds , their Zacks Rank and past performance. Invesco Global Real Estate Income A (MUTF: ASRAX ) invests the lion’s share of its assets in securities and other derivatives related to the real-estate domain. ASRAX may invest not more than 30% of its assets in securities that are rated below investment grade, commonly known as “junk bonds.” Invesco Global Real Estate Income A returned 5% over the year-to-date frame. As of March 2016, TVLAX held 165 issues, with 2.42% of its assets invested in Land Securities Group PLC. Invesco Developing Markets A (MUTF: GTDDX ) seeks capital appreciation over the long run. GTDDX invests a large chunk of its assets in securities of companies that are domiciled in developing countries and are believed to have an impressive growth prospect. The fund invests in securities of companies irrespective of the market capitalizations. Invesco Developing Markets A returned 12.7% over the year-to-date frame. GTDDX has an expense ratio of 1.43% as compared to the category average of 1.51%. Invesco Asia Pacific Growth A (MUTF: ASIAX ) invests a major portion of its assets in equity securities and depositary receipts of companies located in the Asia Pacific region, excluding Japan. ASIAX may also invest in other derivatives and instruments issued in the region. Though ASIAX invests in securities of companies across all capitalizations, it is expected to invest a notable portion of its assets in securities of companies with small- and medium-size market capitalization. Invesco Asia Pacific Growth A returned 2.8% over the year-to-date frame. Shuxin (Steve) Cao is one of the fund managers of ASIAX since 1999. Invesco Corporate Bond Y (MUTF: ACCHX ) seeks current income through preservation of capital. ACCHX invests a large share of its assets in bonds issued by corporate issuers. The fund is expected to invest a minimum of 65% of its assets in securities that are rated investment-grade. Invesco Corporate Bond Y returned 5.9% over the year-to-date frame. GTDDX has an expense ratio of 0.66% as compared to the category average of 0.86%. Original Post

Volatility ETFs: Buy Or Sell Now?

Volatility in the stock market is represented by the CBOE Volatility Index (VIX), also known as the fear gauge. This tends to outperform when markets are falling or when fear over the future is high. Notably, VIX has risen 9.6% over the past one-month period, reflecting that worries over the stock market have started to build up. Will the fear level continue to rise and push up the index? What is Pushing Fear Levels? After an impressive comeback, the S&P 500 and the Dow Jones dropped for the third consecutive week, representing the longest streak of weekly declines since January’s market meltdown. This slump has wiped off most of the gains from these indices, pushing the year-to-date gains down to 0.1% for the S&P 500 and 0.6% for the Dow Jones. The decline resumed after a spate of downbeat data across the globe, in particular China and the U.K., that brought global growth worries back on the table. Additionally, the growth momentum in the U.S. has slowed down and investors’ faith in central banks’ ability to boost growth across the globe has faded. Further, signs of sluggish growth in Europe and Asia, a pullback in industrial metals, the oil price drama, and Fed’s uncertain policy continue to weigh on stocks. This is especially true as Friday’s solid retail sales data for April reignited the case for two interest rates hikes this year while the weaker-than-expected April payrolls data early this month cast doubts over the health of the economy and pushed back the chances of a rate hike. The latest round of selling last week followed a slew of disappointing earnings reports from retailers that sparked off concerns over consumer spending. All these factors flared up volatility, pushing the volatility index higher. As per the ft.com , investors pulled out about $7.4 billion from global equities last week, sending the total outflow of five weeks to a five-year high of $44 billion. This reflects weakening faith in the global equity markets. Moreover, the International Monetary Fund (IMF) once again cut its global growth forecast to 3.2% from the earlier projection of 3.4%, citing that the ill effects of a persistent slowdown in China and lower oil prices have spilled over into emerging markets such as Brazil. The agency also highlighted economic weakness in developed countries like Japan, Europe and the U.S. This could lead to poor stock performance across the globe, providing further support to the volatility index. Against a woe-begotten backdrop, investors could look into volatility products that have proven themselves as short-time winners in turbulent times. They can use these products for hedging purposes to ensure safety when the stock market starts to plunge. Volatility ETFs in Focus A popular ETN option providing exposure to volatility, the iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA: VXX ), sees a truly impressive volume level of about 73.3 million shares a day. The note has amassed $1.6 billion in AUM and charges 89 bps in fees per year. The ETN focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility of the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second month VIX futures contracts. VXX shed 7.4% over the past one-month period. Two more products – the ProShares VIX Short-Term Futures ETF (NYSEARCA: VIXY ) and the VelocityShares VIX Short-Term ETN (NASDAQ: VIIX ) – also track the same index. VIXY has $252.7 million in AUM and sees good average daily volume of more than 3.4 million shares while VIIX is the unpopular one of the two with just $9.1 million in its asset base and good volume of around 304,000 shares per day. While VIXY charges 85 bps in annual fee, VIIX is costlier, charging 0.89% annually from investors. Both products are down 7.3% in the same time frame. Another product – the C-Tracks ETN on CVOL (NYSEARCA: CVOL ) – linked to the Citi Volatility Index Total Return, provides investors with direct exposure to the implied volatility of the large-cap U.S. stocks. The benchmark combines a daily rolling long exposure to the third and fourth month futures contracts on the VIX with short exposure to the S&P 500 Total Return Index. The product has amassed $2.2 million in its asset base while charging 1.15% in annual fees from investors. The note trades in a relatively lower volume of about 147,000 shares per day and lost 5% over the past one month. Technical Look However, when we took a closer look to the technical charts, we found that the volatility index and the ETFs would remain range bound at least in the near term. In the chart below, we have considered the price movement of the ultra-popular VXX. The ETN touched its 52-week low of $14.64 on May 11 and its short-term moving average (9-Day EMA) is well below the mid and long terms (50- and 200-Day EMA), suggesting some pessimism for the product. Additionally, the bearish trend is confirmed by the parabolic SAR, which is currently trading above the current price of the fund. However, the Relative Strength Index (RSI) has been rising lately and currently stands at 42.97, indicating that the fund has clearly moved away from its oversold territory, reflecting some potential upside. Bottom Line Given global growth fears as well as mixed technical signals, it seems prudent for investors to wait until the stock market falls or more fear factors creep into the picture. Further, investors should note that these products are suitable only for short-term traders. This is because most of the time, the VIX futures market trades in a condition known as ‘contango’, a situation where near-term futures are cheaper than long-term futures contracts. Since the volatility ETFs and ETNs like VXX must roll from month to month in order to avoid ‘delivery’, the situation of contango can eat away returns over long periods. Original Post