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Multi-Asset ETFs to Play as Trade Tensions Ebb and Flow

Sanghamitra Saha

Uncertainty gripped the markets in May, thanks to the incendiary rhetoric by Trump regarding tariffs. The Trump administration raised the current 10% tariff on $200 billion worth of Chinese goods to 25% on May 10.Moreover, Trump said that he will impose 25% tax on an extra $325 billion of Chinese goods “shortly,” per CNBC(read: 6 Stocks That Mainly Dragged Dow Jones ETFs on Tuesday).

Amid this backdrop, the United States and China initiated trade negotiations. While on one hand, Beijing vowed to hit back as tariffs were raised, Trump says a deal is still “possible.” Investors should note that U.S. Treasury yields remained at low levels due to a spike in uncertainty.

No wonder, such uncertainty caused a crash in the market. iPath S&P 500 VIX ST Futures ETN VXX has gained about 11.1% in the past five days (as of May 9, 2019) while SPDR S&P 500 ETF SPY has lost about 2.5%.

Investors should definitely want to know about ways that could save them from a market bloodbath. In this regard, we highlight a few multi-asset ETFs that could offer investors great returns in the form of capital appreciation and income.

Notably, the multi-asset strategy looks to boost returns and lower overall volatility in portfolios. These products normally provide a high level of current income and take care of downside risks of a specific asset class. These products cater to various asset classes (equity, fixed income, and alternative securities), which have low correlation to each other.

YieldShares High Income ETF (YYY)

This fund yields about 8.76% annually. It holds 30 closed-end funds ranked the highest by the ISE on the basis of three criteria, namely, fund yield, discount to net asset value and liquidity. Around 75% of the fund is targeted at debt securities while the rest are in equities (read: High Income ETFs Worth Their High Costs).

Arrow Dow Jones Global Yield ETF (GYLD)

This fund provides almost equal-weight exposure across five global areas — equities, real estate, alternatives, sovereign debt, and corporate debt. This is easily done by tracking the Dow Jones Global Composite Yield Index. The ETF puts 20% each in the five categories with every security holding less than 1% of total assets. This ensures that the product is well diversified among 150 securities with an annual dividend yield of 7.86% (read: 5 Red Hot Dividend ETFs Yielding 5% or More).

iShares Morningstar Multi-Asset Income ETF (IYLD)

The fund looks to track the investment results of an index composed of underlying equity, fixed income and other income funds that collectively seek to deliver high current income while providing an opportunity for capital appreciation. The product yields about 5.34% annually. The U.S. takes the top spot with 52.50% allocation followed by 4.49% in U.K. and 2.66% in Australia.

Invesco DWA Tactical Multi-Asset Income ETF (DWIN)

The underlying Dorsey Wright Multi-Asset Income index may invest in both fixed income and equity income ETFs, including those holding investment grade and high yield bonds, fixed-rate preferred shares, dividend paying equities, US Treasuries, MLPs and real estate investment trusts. It rotates between income-oriented segments, depending on market momentum as well as yield criteria. The fund yields 5.89% annually.

Principal Spectrum Preferred Securities Active ETF (PREF)

The fund is active and does not track a benchmark. It yields around 5.19% annually. Under normal circumstances, the fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in preferred securities at the time of purchase. It charges 55 bps in fees.

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YieldShares High Income ETF (YYY): ETF Research Reports
 
iShares Morningstar Multi-Asset Income ETF (IYLD): ETF Research Reports
 
Arrow Dow Jones Global Yield ETF (GYLD): ETF Research Reports
 
iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX): ETF Research Reports
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
Principal Spectrum Preferred Securities Active ETF (PREF): ETF Research Reports
 
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