There are some serious opportunities and yields available in corporate bonds right now. For investors, the challenge is how to best access them. Thankfully, ETFs offer a variety of flexible, tradable strategies to help craft a bespoke allocation in portfolios. The (AHYB ) and the (KORP ) pair together nicely to deliver just that.
- AHYB and KORP have provided decent long-term returns, up 7.2% over five years and 5.3% over three years, respectively.
- Their active ETF approaches to corporates have also provided some healthy income, with 5.99% and 5.08% 12-month distribution rates as of June 30th.
- AHYB focuses on the highest-yield corporate bond offerings, while KORP looks at a more diverse group.
AHYB charges 45 basis points, and KORP charges 29 basis points. Both funds actively invest in corporate bonds, but with very different goals and approaches. AHYB targets high yield and income, while KORP focuses on generating steady income with a lower-yield, more conservative approach.
Specifically, AHYB targets high-yield corporates with three- to 10-year maturities. The active strategy applies a bottom-up approach, screening for fundamental metrics like cash flow, credit quality, and valuation. Additionally, the fund’s managers also consider key macro factors such as inflation risk and interest rates.
This approach has produced healthy income and yields for the active corporate bonds ETF. According to American Century Investments data, AHYB provided a 5.99% 12-month distribution rate and a 6.65% yield to maturity, as of June 30. With a 7.2% five-year return, the fund has outperformed the ETF Database High Yield Bonds Category average.
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So, what does KORP offer alongside AHYB? The diversified corporate bond ETF has outperformed the ETF Database Corporate Bonds category average with a 5.3% three-year return.
KORP actively targets the lower end of investment-grade debt for a duration of five to seven years. According to American Century Investments data, the fund offers a 5.08% 12-month distribution rate and a 6.1% yield to maturity.
That said, it does not have the same explicit focus on high yield as AHYB does. Together, the pair offer different views into corporate bonds that can really intrigue.
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