AOHY hunts for yield in the riskier corners of fixed income, targeting high-yield corporate bonds and other credit instruments that traditional bond funds often avoid. The fund aims to generate income substantially above investment-grade alternatives by accepting higher default risk.
How It Works
The ETF employs active management to navigate the junk bond market, focusing on BB and B-rated securities while opportunistically dipping into CCC territory when spreads compensate for risk. Portfolio construction emphasizes sector diversification and maturity management, typically holding 80-120 positions with average duration around 4-5 years. The managers actively trade around credit events and market dislocations.
Key Features
- Active credit selection in high-yield space versus passive junk bond indices
- 5.39% yield significantly exceeds investment-grade corporate bonds at ~4%
- Tactical allocation across credit quality tiers based on spread opportunities
Risks
- Default risk could spike in recession — expect 15-20% drawdowns when credit blows up
- Interest rate sensitivity despite shorter duration — rising rates still hurt prices
- Liquidity can evaporate in stressed markets, widening bid-ask spreads to 1-2%
Who Should Own This
Best suited for income-focused investors who understand credit risk and can stomach volatility for higher yield. Works as a 5-10% satellite position alongside core bond holdings, particularly for retirees needing income above what investment-grade offers. Avoid if you need liquidity or can't handle seeing red during credit selloffs.