Looking for fixed income alternatives? Consider This Dividend Fund


DAlthough the Federal Reserve raised interest rates on Monday by 0.25%, institutional investors and analysts expect even more aggressive rate hikes this year that could see interest rates end the year on high. 2%, reports the Financial Times.

Goldman Sachs expects the 10-year yield to reach 2.7% by the end of the year, while Citibank analysts expect four increases of 0.50% from May and through September .

“Futures volumes are increasing significantly. . . after several members of the Federal Open Market Committee came forward and raised the odds of a rate hike by 50 basis points,” said Chuck Tomes, portfolio manager at Manulife Investment Management.

The rapid swings in yields are partly attributed to a less liquid market, which is causing sharper spikes in volatility, as well as the repositioning of portfolios by advisors and investors before the end of the quarter next week. On top of all that, investors are potentially hedging against any changes the war in Ukraine may cause over the weekend as global tensions continue to mount.

“Liquidity is extremely thin in the market and volatility is extreme,” said Gennadiy Goldberg, rates strategist for TD Securities.

KVLE offers an inclination towards dividend yield while diversifying

Rising interest rates are prompting advisors and investors to consider alternative sources of income as bond allocations continue to see outflows. One place advisors turn to when looking for income is in dividends and dividend-paying companies.

the KFA Value Line Dynamic Core Equity Index ETF (KVLE) follows a strategy of investing in high-yielding companies while diversifying in a way that a “thematic” portfolio does not. The fund is a core equity portfolio of securities that are skewed to favor dividend yield, and it seeks to increase yield while avoiding investing only in high yielding sectors and stocks.

KVLE is benchmarked against the 3D/L Value Line Dynamic Core Equity Index and uses optimization technology to emphasize stocks with strong dividend yields that have the highest security rankings and speed of the value line. The fund uses a smart beta strategy to seek more profitable alpha as well as a risk management strategy that seeks to limit the effects of significant market declines while being positioned to capture positive returns.

KVLE has an expense ratio of 0.55%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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