ETF providers have been quick to launch a bevy of new active funds at a quickened pace given the current trend. The same can be said for fixed income allocation. But one fund that’s been around for a few years is the Invesco Rochester High Yield Municipal ETF (IROC). It offers an active option focused on maximizing yield.
Munis have been an ideal alternative for fixed income investors looking to meld the benefits of yield and quality. With muni fundamentals a step ahead of corporate bonds, investors typically don’t have to take on heavier credit risk to extract that extra mount of yield.
IROC May Intrigue for Emboldened Fixed Income Investors
For emboldened fixed income investors who don’t mind the added credit risk to maximize yield opportunities, IROC might be a suitable inclusion in the portfolio. It’s an alternative for those looking to get into high-yield corporates, but are wary of the higher credit risk. In times of elevated interest rates like now, this could be a concern for high-yield debt. This is because mounting servicing costs can eat into a company’s revenue.
Of course, the added benefit of munis is that their income is devoid of federal income tax compared to their corporate counterparts. The active strategy inherent in the fund allows the portfolio managers of IROC to tailor the holdings to suit current market conditions. This is especially beneficial during times of heavy volatility.
As of August 1, the fund has 67 holdings, drawing from various sources of muni income for diversification. In terms of maturity dates, the fund runs the gamut in terms of exposure. Investors will get a mix of short-term, intermediate, and long-term debt for yield opportunities. Its 0.39% expense ratio is offset by its 30-day SEC yield of 4.23% and 12-month distribution rate of 4.44% (both also as of August 1).
Thirty-six percent of the fund comprises in investment-grade muni debt. The rest consists of “Not Rated” holdings. Those who would rather tilt toward more IG munis and don’t mind sacrificing yield to do so can consider other options from Invesco.
