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New Goldman Sachs ETF shuns riskiest debt as junk bonds wobble

Traders work on the floor of the New York Stock Exchange near the Goldman Sachs stall July 16, 2010.

Brendan McDermid/Reuters

Investors who like junk bonds but are nervous about last month's high-yield sell-off have a new vehicle that lets them avoid the riskiest debt.

Goldman Sachs Group Inc.'s latest exchange-traded fund, which has the ticker GHYB, will focus on high-yield corporate bonds deemed least likely to default, according to an announcement made on Thursday.

Junk bonds tumbled last month as a combination of geopolitical turmoil and uncertainty about the normalization of U.S. interest-rate policy weighed on risk sentiment.

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Yields jumped from near-historic lows, with the premium paid by companies over Treasuries climbing to the highest in four months, a Bloomberg index shows.

Investors yanked $500-million (U.S.) from the biggest junk ETF, the most since May, data compiled by Bloomberg show.

The new fund, Goldman's third debt ETF, "aims to address concerns surrounding high-yield bonds, particularly that they can be less liquid and more prone to default," Jason Singer, who runs the fund for Goldman Sachs Asset Management, said in the release.

While it's not the first fund to use such a strategy, Goldman Sachs's offering comes with a smaller price tag than rival ETFs.

It charges just 34 basis points, less than all but three junk funds.

BlackRock Inc.'s high-yield "defensive" bond ETF charges one basis point more, while WisdomTree Investments Inc.'s ''fundamental ETF" charges an extra four basis points.

Video: Money Monitor: Breaking down smart beta ETFs (The Canadian Press)
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