The Peritus High Yield ETF (Ticker: HYLD) is a NYSE-listed, actively-managed exchange traded fund primarily backed by high yield bonds and floating rate loans, as well as selective investments in dividend paying equities. Fund details for this product are available at: http://hyld.advisorshares.com (fund distributed by Foreside Fund Services, LLC).
- Access: Any shareholder that has access to a brokerage account can purchase shares of an ETF.
- Broad Exposure: The ETF allows the investor to be exposed to a broad and diversified basket of securities with a single trade, regardless of the size of the investment.
- Liquidity: Unlike mutual funds, ETF shares are publicly traded throughout the trading day, giving it liquidity like any other stock. However, unlike a stock, the ETF’s liquidity is less impacted by the supply and demand of shares, as ETF shares can be created or redeemed at any time with the share price generally in line with the fund’s net asset value.
- Transparency: ETFs are registered with the SEC and the fund’s holdings must be disclosed on a daily basis, allowing investors to know the exact securities in which they are invested.
- Tax Efficiency: In a mutual fund, inflows and outflows are done in cash, which impacts all remaining shareholders in the fund. However, ETFs can avoid this through in-kind trading. In-kind redemption and creation of fund shares can allow for capital gains to be realized outside of the fund, at the participant level, avoiding the cost or tax impact for ongoing shareholders.
- Dividends: Many fixed income ETFs pay out monthly dividends.
Additionally, we see benefits to investing in an actively managed ETF versus an index ETF. With active management, the manager is able to focus on only investing in the securities they see as offering the most value, rather than having to invest in less desirable securities just for the sake of tracking the underlying index. Also, with the manager’s focus on security selection and active trading, we believe they are more able to react to changing markets and market conditions and to potentially reduce risk. By the nature of active management, the investor is subject to the manager’s discretion and ability.