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Income Investing: Ideas to Beat the BankSM

In an ever-changing interest rate environment, keeping tabs on the numerous corners of the yield market can be difficult for investors. To help investors stay informed, we offer monthly insights on income investing, covering the latest news, trends and investment opportunities.

BDC Recovery Boosts Income Potential – September 2020*
Authored by: Coulter Regal, CFA, Associate ETF Product Manage

Yields remained mostly unchanged in August and many categories continue to yield near or even below the levels where they stood one year ago. At the end of August, the market received big news from Federal Reserve Chairman Jerome Powell, who announced that the central bank would abandon its policy of pre-emptively raising rates to head off inflation. This breaks decades of tradition, and the adoption of an inflation-averaging strategy may result in interest rates staying low for longer. Despite this era of low rates, there are still pockets of the market that can offer investors attractive income potential.

One area of the market investors may want to consider is business development companies (BDCs). BDCs generate income by lending to, and investing in, private companies and provide exposure to the typically difficult to access private credit market. They offer high income potential and may be an attractive option for investors looking to boost yield and diversification in their portfolio. While this segment of the market was hit hard in March and April, recent earnings calls by BDCs offered valuable insight into the health and outlook of the middle-market space that may point to a continued recovery going forward. One important theme discussed was the increased demand for customized financing needs, particularly as traditional banks have been less aggressive in seeking to make new loans. This may provide opportunity for BDCs to capture better terms, pricing and documentation on new investments going forward. Also discussed was the topic of interest collection and nonperforming loan rates. The two largest BDCs, Ares Capital and Owl Rock Capital, experienced few non-accruals and collected 98% of interest due last quarter. This may indicate that investment income for much of the BDC market has, so far, not been materially impacted by the pandemic, which we believe should help alleviate concerns of deteriorating BDC distributions. While BDCs are still trading below pre-pandemic levels, these insights from quarterly earnings may suggest that they are recovering and could continue to produce attractive income for investors.

The VanEck Vectors® BDC Income ETF (BIZD) offers exposure to publicly traded U.S. BDCs. The Fund’s 30-day SEC yield was 12.31%, as of August 31, and with interest rates historically low and unlikely to rise in the foreseeable future, we view this strategy as an option for investors looking to boost income from their portfolio.

VanEck Vectors Income ETFs

Ticker Fund Name 30 Day SEC Yield (%)3 Duration (Yrs) Gross Expense Net Expense
Municipal Income
XMPT CEF Municipal Income ETF 4.10 -- 2.02 2.02
HYD High Yield Muni ETF 3.72 6.431 0.35 0.35
ITM Intermediate Muni ETF 0.86 5.821 0.24 0.24
MLN Long Muni ETF 1.79 6.601 0.24 0.24
MAAX Muni Allocation ETF 2.96 6.211 0.35 0.35
SHYD Short High Yield Muni ETF 2.65 4.281 0.35 0.35
SMB Short Muni ETF 0.34 3.021 0.20 0.20
Corporate Bond
ANGL Fallen Angel High Yield Bond ETF 4.34 6.482 0.43 0.35
FLTR Investment Grade Floating Rate ETF 0.72 0.072 0.40 0.14
Equity Income
BIZD BDC Income ETF 12.31 -- 10.31 10.24
EINC Energy Income ETF 7.34 -- 0.45 0.45
DURA Morningstar Durable Dividend ETF 3.84 -- 1.14 0.29
MORT Mortgage REIT Income ETF 12.90 -- 0.50 0.41
PFXF Preferred Securities ex Financials ETF 5.60 -- 0.44 0.41
International Bond
CBON ChinaAMC China Bond ETF 2.87 2.142 3.53 0.50
EMAG Emerging Markets Aggregate Bond ETF 3.23 5.592 1.49 0.35
HYEM Emerging Markets High Yield Bond ETF 5.94 3.592 0.47 0.40
GRNB Green Bond ETF 1.35 5.222 0.83 0.20
IHY International High Yield Bond ETF 4.66 3.612 0.62 0.40
EMLC J.P. Morgan EM Local Currency Bond ETF 4.21 5.222 0.36 0.30
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Source: VanEck (as of 08/31/20).
1Duration to Worst. 2Effective Duration. 330-Day SEC Yield is calculated daily, and is a standard yield calculation developed by the Securities and Exchange Commission that allows for fairer comparisons primarily among bond funds. It is based on the most recent 30-day period. This yield figure reflects the interest earned during the period after deducting the Fund's expenses for the period. It does not reflect the yield an investor would have received if they had held the Fund over the last 12 months assuming the most recent NAV. In the absence of temporary expense waivers or reimbursements, the 30-Day SEC Yields on 08/31/20 would have been as follows - XMPT: 4.10%, MAAX: 2.96%, ANGL: 4.28%, FLTR: 0.48%, BIZD: 12.25%, DURA: 3.20%, MORT: 12.82%, PFXF: 5.58%, CBON: 1.90%, EMAG: 2.47%, HYEM: 5.90%, GRNB: 0.83%, IHY: 4.53%, EMLC: 4.18%, . Expenses for VanEck Vectors Equity and Income ETFs are contractually capped. Expense caps exclude acquired fund fees and expenses, interest expense, trading expenses, taxes and extraordinary expenses. Expense Caps: XMPT: 0.40%, MAAX: 0.08%, ANGL: 0.35%, FLTR: 0.14%, BIZD: 0.40%, DURA: 0.29%, MORT: 0.40%, PFXF: 0.40%, CBON: 0.50%, EMAG: 0.35%, HYEM: 0.40%, GRNB: 0.20%, IHY: 0.40%, EMLC: 0.30%, . Expenses for VanEck Vectors Municipal ETFs are unitary fees. Van Eck Associates Corporation (the “Adviser”) will pay all expenses of these Funds, except for the fee payment under the investment management agreement, acquired fund fees and expenses, interest expense, offering costs, trading expenses, taxes and extraordinary expenses. Expense ratios are as of the most recent prospectus. Past performance is no guarantee of future results. Please see the prospectus of each fund for more detailed information on expenses.

Morningstar ETF Category Flows

Estimated Net Flow ($M)
Morningstar Category Name 1-Mo QTD YTD 1-Yr
Short-Term Bond 3,670 6,723 17,810 21,849
High Yield Bond 2,440 9,051 22,270 29,524
Intermediate Government 657 183 3,547 10,907
Long-Term Bond 589 1,471 1,635 2,918
Emerging Markets Bond 569 1,439 771 1,204
Muni National Short 376 716 1,866 2,382
Muni National Long 348 718 1,238 1,527
Muni National Interm 280 1,469 4,803 7,604
Bank Loan 222 417 -2,364 -370
World Bond 136 274 -12 -258
High Yield Muni -11 101 -80 339
Short Government -121 -625 9,942 10,187
Long Government -1,750 -2,199 -920 165
Ultrashort Bond -1,790 -3,395 7,066 8,589
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Source: Morningstar (as of 08/31/20). Not representative of fund or fund indices.

Investment Category Yields

Yield to Worst (%)
Category 08/31/20 07/31/20 08/31/19
EM USD High Yield Aggregate 7.32 7.84 8.36
Global High Yield Corporates 5.40 5.63 5.63
U.S. High Yield Corporates 5.36 5.46 5.81
EM USD Sovereigns 5.06 5.06 5.16
High Yield Municipals 4.53 4.53 3.96
EM Local Currency Sovereigns 4.45 4.35 5.26
EM USD High Yield + Investment Grade Corporates 4.04 4.26 4.71
U.S. Corporates 1.95 1.86 2.81
Municipals 1.30 1.20 1.65
U.S. Aggregate 1.15 1.05 2.13
Global Aggregate 0.90 0.82 1.18
Preferred Securities 0.78 1.06 1.37
10 Year Treasuries 0.70 0.54 1.50
Treasury Inflation Protected Securities 0.68 0.62 1.69
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FactSet (as of dates indicated). See bottom of page for Index names. Not representative of fund or fund indices. Please see standard performance for these categories below. Past performance is no guarantee of future results.

U.S. Yield Curves

Treasury Yield Curve

Muncipal AAA Yield Curve

Source: Bloomberg (as of 08/31/20).

Global 10-Year Sovereign Yields (%)

Source: FactSet and Bloomberg (as of 08/31/20). Based on local currency prices. Past performance is no guarantee of future results.

Investment Category Total Returns (%)

Month-End 08/31/2020 Quarter-End 06/30/2020
Investment Category 1 MO* YTD* 1 YR 3 YR 5 YR
U.S. Aggregate -0.81 6.85 8.67 5.31 4.29
U.S. High Yield Corporates 0.98 0.75 -1.09 2.93 4.56
Global High Yield Corporates 1.55 1.95 -0.58 2.95 4.61
EM USD High Yield Aggregate 2.14 -0.84 -4.28 1.22 4.99
EM USD High Yield + Investment Grade Corporates 0.84 3.69 4.09 4.60 5.28
EM Local Currency Sovereigns -0.33 -4.39 -2.80 1.13 2.33
EM USD Sovereigns 0.51 1.37 0.49 3.59 5.28
U.S. Corporates -1.38 6.94 9.43 6.32 5.81
U.S. REITs -0.34 5.07 6.51 5.59 5.15
Global Aggregate -0.15 6.11 4.19 3.78 3.54
Treasury Inflation Protected Securities 1.09 9.63 8.21 5.03 3.73
Municipals -0.47 3.31 4.41 4.21 3.92
High Yield Municipals 0.26 0.27 1.01 5.26 5.75
10 Year Treasuries -1.33 12.48 14.10 7.03 4.85
Preferred Securities 1.18 3.24 2.70 3.84 5.62
U.S. Dividend Stocks 2.01 -17.84 -15.04 -0.44 5.41
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Source: FactSet (as of dates indicated). *Returns less than one year are not annualized.
The performance quoted represents past performance. Past performance is no guarantee of future results. Not representative of fund or fund indices. The listed indices are unmanaged and are not securities in which an investment can be made. 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 cannot invest directly in the Index.

VanEck Vectors Income ETF Total Returns (%)

Month-End 08/31/20 Quarter-End 06/30/20
Ticker Fund Name 1 MO* YTD* 1 YR 3 YR 5 YR LIFE Commenced
Municipal Income
HYD High Yield Muni ETF 0.16 -3.36 -3.32 2.70 3.82 6.65 02/04/09
ITM Intermediate Muni ETF -0.49 4.06 4.71 4.49 4.23 4.45 12/04/07
MAAX Muni Allocation ETF -0.30 -2.22 -1.63 -- -- -0.54 05/15/19
MLN Long Muni ETF -0.72 3.95 4.92 5.13 4.97 4.32 01/02/08
SHYD Short High Yield Muni ETF 0.30 -0.90 -0.69 2.78 2.28 2.53 01/13/14
SMB Short Muni ETF -0.05 2.74 3.14 2.40 1.92 2.37 02/22/08
XMPT CEF Municipal Income ETF -1.01 0.79 1.39 3.59 5.68 5.74 07/12/11
Corporate Bond
ANGL Fallen Angel High Yield Bond ETF 1.04 6.20 3.52 4.44 6.85 7.67 04/10/12
FLTR Investment Grade Floating Rate ETF 0.38 1.12 1.85 2.41 2.11 1.53 04/25/11
Equity Income
BIZD BDC Income ETF 4.74 -19.63 -19.14 -4.04 1.60 1.59 02/11/13
DURA Morningstar Durable Dividend ETF 3.87 -5.33 -4.71 -- -- 3.86 10/30/18
EINC Energy Income ETF 3.34 -26.75 -30.90 -11.78 -16.85 -14.24 03/12/12
MORT Mortgage REIT Income ETF 2.08 -35.69 -36.08 -11.33 -1.28 2.60 08/16/11
PFXF Preferred Securities ex Financials ETF 1.86 -0.21 -2.94 2.25 3.79 4.55 07/16/12
International Bond
CBON ChinaAMC China Bond ETF 1.84 3.90 1.41 2.74 0.85 0.97 11/10/14
EMAG Emerging Markets Aggregate Bond ETF 0.35 0.23 0.51 2.80 3.57 2.50 05/11/11
EMLC J.P. Morgan EM Local Currency Bond ETF -0.28 -3.91 -5.51 -0.70 0.96 0.40 07/22/10
GRNB Green Bond ETF -0.45 6.57 4.76 3.37 -- 4.76 03/03/17
HYEM Emerging Markets High Yield Bond ETF 1.84 1.70 0.14 2.76 4.60 4.83 05/08/12
IHY International High Yield Bond ETF 1.81 3.06 0.17 2.78 4.24 4.62 04/02/12
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Source: FactSet (as of dates indicated). *Returns less than one year are not annualized.
The performance quoted represents past performance. Past performance is no guarantee of future results. Performance information for the VanEck Vectors ETFs reflects temporary waivers of expenses and/or fees. Had the VanEck Vectors ETFs incurred all expenses, investment returns would have been reduced. The investment return and value of shares of VanEck Vectors ETFs will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Performance may be lower or higher than performance quoted. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV.

Month-End 08/31/20 Quarter-End 06/30/20
Ticker Fund Name 1 MO* YTD* 1 YR 3 YR 5 YR LIFE Commenced
Municipal Income
HYD High Yield Muni ETF -0.23 -3.38 -3.08 2.91 4.27 6.68 02/04/09
ITM Intermediate Muni ETF -0.60 3.99 4.78 4.49 4.23 4.45 12/04/07
MAAX Muni Allocation ETF -0.01 -2.27 -1.47 -- -- -0.47 05/15/19
MLN Long Muni ETF 0.22 3.82 4.76 5.15 5.07 4.30 01/02/08
SHYD Short High Yield Muni ETF 0.33 -1.19 -1.72 2.57 2.16 2.38 01/13/14
SMB Short Muni ETF 0.14 2.76 3.38 2.53 2.08 2.38 02/22/08
XMPT CEF Municipal Income ETF -0.95 0.69 1.51 3.72 5.75 5.78 07/12/11
Corporate Bond
ANGL Fallen Angel High Yield Bond ETF -0.12 5.71 3.24 4.46 6.83 7.69 04/10/12
FLTR Investment Grade Floating Rate ETF 0.58 1.19 1.93 2.32 2.15 1.53 04/25/11
Equity Income
BIZD BDC Income ETF 4.54 -19.91 -18.67 -3.89 1.63 1.67 02/11/13
DURA Morningstar Durable Dividend ETF 4.12 -5.21 -4.66 -- -- 3.92 10/30/18
EINC Energy Income ETF 4.16 -26.34 -30.46 -11.58 -16.74 -14.20 03/12/12
MORT Mortgage REIT Income ETF 2.10 -35.72 -35.83 -11.17 -1.27 2.61 08/16/11
PFXF Preferred Securities ex Financials ETF 2.08 -0.12 -2.72 2.34 3.76 4.61 07/16/12
International Bond
CBON ChinaAMC China Bond ETF 1.75 5.11 2.11 3.35 0.94 1.11 11/10/14
EMAG Emerging Markets Aggregate Bond ETF -0.01 -0.41 -0.41 2.71 3.66 2.44 05/11/11
EMLC J.P. Morgan EM Local Currency Bond ETF 0.24 -3.86 -5.98 -0.89 0.93 0.35 07/22/10
GRNB Green Bond ETF -0.35 6.74 4.98 3.34 -- 4.85 03/03/17
HYEM Emerging Markets High Yield Bond ETF 1.49 1.80 -0.66 2.81 4.72 4.83 05/08/12
IHY International High Yield Bond ETF 2.43 3.07 0.30 2.85 4.20 4.65 04/02/12
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Source: FactSet (as of dates indicated). *Returns less than one year are not annualized.
The performance quoted represents past performance. Past performance is no guarantee of future results. Performance information for the VanEck Vectors ETFs reflects temporary waivers of expenses and/or fees. Had the VanEck Vectors ETFs incurred all expenses, investment returns would have been reduced. The investment return and value of shares of VanEck Vectors ETFs will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Performance may be lower or higher than performance quoted. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV.



Prior to September 1, 2020, the Municipal Income funds were known as the VanEck Vectors AMT-Free Short Municipal Index ETF, VanEck Vectors AMT-Free Intermediate Municipal Index ETF, VanEck Vectors AMT-Free Long Municipal Index ETF, VanEck Vectors Short High-Yield Municipal Index ETF, VanEck Vectors High-Yield Municipal Index ETF, and the VanEck Vectors Municipal Allocation ETF.

Investment category index representation: U.S. Aggregate represents the Bloomberg Barclays US Aggregate Index, U.S. High Yield Corporates represents the ICE BofAML U.S. High Yield Master Index, Global High Yield Corporates represents the ICE BofAML Global High Yield Index, EM USD High Yield Aggregate represents the Bloomberg Barclays EM Aggregate High Yield Index, EM USD High Yield + Investment Grade Corporates represents the ICE BofAML EM Liquid Corp Plus Index, EM Local Currency Sovereigns represents the JPM GBI EM Global Diversified Index, EM USD Sovereigns represents the JPM EMBI Global Diversified Index, U.S. Corporates represents the Bloomberg Barclays US Corp Index, U.S. REITs represents the ICE BofAML U.S. REIT Index, Global Aggregate represents the Bloomberg Barclays Global Aggregate Index, Treasury Inflation Protected Securities represents the Bloomberg Barclays US Treasury TIPS Index, Municipals represents the Bloomberg Barclays Municipal Index, High Yield Municipals represents the Bloomberg Barclays HY Muni Index, 10 Year Treasuries represents the Bloomberg Barclays US Treasury 10 Yr Index, Preferred Securities represents the ICE BofAML Preferreds Index, U.S. Dividend Stocks represents the DJ U.S. Select Dividend Index.

There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Debt securities carry interest rate and credit risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. High-yield, municipal securities and emerging markets securities have additional risks. Some of the underlying securities of some Funds may be subject to call risk, which may result in the Funds having to reinvest the proceeds at lower interest rates, resulting in a decline in the Funds' income. Please see the prospectus of each Fund for more complete information regarding each Fund's specific risks.

*The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.

Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.

Income Investing: Ideas to Beat the Bank is a service mark of Van Eck Associates Corporation