Skip directly to Accessibility Notice

VanEck Videos

Seasoned investment professionals, sector-dedicated analysts, and creative thinkers are at the heart of our business. Get their perspective on today's market climate.

All Videos

Video Transcript

TOM LYDON: Hi, I'm Tom Lydon here in San Diego at the Charles Schwab IMPACT Conference, here with Kol Estreicher, ETF Specialist with VanEck. Great seeing you, Kol.

KOL ESTREICHER: Likewise, Tom. Thanks for having me.

LYDON: There's a lot of challenges for investors and advisors today in this low-yield environment. Walk us through some of the things you're thinking about at VanEck, maybe some strategies advisors might consider.

ESTREICHER: Income in this environment may appear to be challenging. If you look at where the 10-year yield was a year ago today, it was about 140 basis points higher. So investors have to be feeling the effects of reinvestment risk now that coupon yields aren't nearly as compelling as they once were. But we don't think this low interest rate environment is indicative of a recession. Sure, you can point to some intermediate- or longer-term headwinds, but for the most part economic conditions are relatively benign and we have an accommodative Fed [U.S. Federal Reserve] that seems fairly well-committed to telegraphing the policy path. So that should help neutralize a lot of that price volatility associated with a rising interest rate environment, in an unexpected rate environment as well. So, within that framework, we think investors can look to incorporate more credit or more duration risk in their portfolios, so they don't have to be too conservative and risk leaving money on the table.

So, a couple of fixed income asset classes to keep in mind. You could look at high-yield corporates, high-yield munis, emerging markets debt and there may even be ESG [environmental, social and governance] solutions that could be viable for portfolios. And then on the equity income side, high-dividend strategies, no shortage of ideas there. But investors need to be careful and take a look under the hood to understand what you own. And then preferred securities, that could be another place to add some incremental yield to the portfolio. We think adding those strategies or asset classes inside the ETF wrapper can add an element of diversification into the portfolio, ultimately reducing total risk.

LYDON: So when you talk about all these options outside of the Barclays Agg [Bloomberg Barclays US Aggregate Bond Index], it's not too risky at this point in time where the Fed isn't all to go out on duration or even go outside the U.S., right?

ESTREICHER: Correct. Yeah, so a couple ideas. We run an ETF, fallen angels [VanEck Vectors® Fallen Angel High Yield Bond ETF (ANGL®)]. It tracks an often-overlooked subset of the high-yield marketplace. The ETF looks at the Bank of America Merrill Lynch fallen angel index [ICE BofAML US Fallen Angel High Yield Index (H0FA)] and that index has actually outperformed broad market high yield in 11 out of the previous 15 years and is up over 200 basis points year-to-date due to three unique characteristics inherent to fallen angel bonds. So you have this forced selling behavioral phenomenon associated with the downgrade process, meaning that money managers or strategists with an investment-grade mandate can't hold junk and have to exit their positions.

LYDON: Right.

ESTREICHER: Second, you have sector themes and sector differentiation relative to broad market. And third, you have a higher credit quality component, which really helps to insulate angels relative to broad market high yield during those periods of extreme spread widening.

LYDON: A-N-G-L, correct?

ESTREICHER: A-N-G-L, correct.

LYDON: Excellent. Kol, great seeing you. Thank you.

ESTREICHER: Yeah. Thanks very much, Tom.

- - - - - - - - - - - - - -

IMPORTANT DISCLOSURE

The views and opinions expressed are those of the speaker and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about VanEck Funds, VanEck Vectors ETFs or fund performance, visit vaneck.com. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com. Fund Holdings will vary.

Index returns are not Fund returns and do not reflect any management fees or brokerage expenses. Certain indices may take into account withholding taxes. Investors can not invest directly in the Index. Returns for actual Fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses. Index returns assume that dividends have been reinvested.

An investment in the VanEck Vectors® Fallen Angel High Yield Bond ETF (ANGL®) may be subject to risk which includes, among others, high yield securities, foreign securities, foreign currency, credit, interest rate, restricted securities, market, operational, call, sampling, basic materials, consumer discretionary, energy, financial, communications, information technology, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares and concentration risks, all of which may adversely affect the Fund.

Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results. Returns for actual Fund investments may differ from what is shown because of differences in timing, the amount invested, and fees and expenses.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com/etfs. Please read the prospectus and summary prospectus carefully before investing.

No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Securities Corporation. © Van Eck Securities Corporation.

Van Eck Securities Corporation, Distributor

666 Third Avenue, New York, NY 10017