Real assets, especially infrastructure, are highly complementary to high yield fixed income investments.
A pairing that works well together is the FlexShares High Yield Value-Score Bond (HYGV) Index Fund and the FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA).
The two funds were two of FlexShares’ most popular ETFs last month, measured by net inflows. NFRA took first place after recording $100 million in net inflows in June, and HYGV took third place, recording $37 million in net inflows during the month.
HYGV is an ideal solution for investors looking to add income while avoiding riskier unwanted debt, while NFRA provides diversification and boosts income generation by providing exposure to companies that have predictable cash flows.
HYGV tracks a proprietary index of high yield bonds sorted by value and quality. HYGV’s methodology rates issuers based on factors such as valuation, creditworthiness, management effectiveness and profitability. Securities are screened for liquidity and the portfolio imposes caps on individual bonds, issuers, sectors, duration, turnover and credit rating, according to VettaFi.
NFRA seeks investment results that generally correspond to the price and yield performance of the STOXX Global Broad Infrastructure Index. The market-cap-weighted index invests in companies that derive at least 50% of their revenue from segments such as energy, communications, utilities, transportation and, unusually, outsourcing government, such as hospitals, prisons and postal services.
To maintain diversification, the index imposes certain constraints, such as limits on the overall weighting of each segment. The portfolio is dominated by North American equities, followed by Japan, Australia and the UK
Infrastructure issuers tend to have predictable cash flows because they provide essential services used in all economic environments. Infrastructure stocks have both equity and interest rate exposure and can provide an alternative source of income, according to FlexShares.
For more news, insights and strategy visit the Multi-asset channel.