BNDS: Complex Problems Require Smart Solutions
In today’s complex fixed income investing environment, it can be very difficult to thread the needle of seeking steady current income while also maintaining a focus on capital appreciation. The Infrastructure Capital Bond Income ETF (BNDS) is an actively managed bond product that aims to help investors do just that. BNDS focuses on investing in undervalued corporate bonds that are carefully screened by the portfolio management team at Infrastructure Capital Advisors before inclusion.
Let’s take a look under the hood at the strategy that BNDS employs and how its current holdings showcase how active management is ideal for this type of allocation.
A Disciplined Approach to Bond Selection
Since launching on January 1st, 2025, BNDS has put together a focused portfolio of fixed income and fixed income-like securities. This portfolio is concentrated in industries known for tangible asset bases and high cash flow generation, energy, real estate investment trusts (REITs), communication services, and financials. These four represent nearly 70% of the portfolio’s weight. While this allocation may seem heavy handed, the team behind the strategy is well known for both their valuation methodologies as well as their macro view of the market.
BNDS Weight by sector as of 3/31/2025.
People:
Jay Hatfield is the portfolio manager for BNDS and has nearly 30 years of experience managing credit and infrastructure portfolios in addition to being heavily focused on macro analysis of credit markets. He’s been refining his strategies to be as robust as possible through all types of market conditions. He and his team have been finding systematic ways of unearthing undervalued companies and taking long-term positions to capitalize on them.
Investment Process:
The team utilizes a multi-factor proprietary valuation model that includes but isn’t limited to debt securities term, credit, and liquidity premium. It also uses industry, sector, market capitalization, and value relative to the characteristics of other ETFs, ELNs, investment companies, or indexes that predominately invest in debt securities in its approach.1 In addition to this careful screening, the fund utilizes a modest amount (20%-30%) of leverage obtained via covered call writing to enhance their short-term income stream. This process comes with a gross expense ratio cost of 0.81% a year (as of 5/31/2025).
The result is a current SEC Yield of 7.23%. This compares to 4.48% for the BBG U.S. Aggregate Index (USD) one of the most heavily benchmarked broad market credit indices. BNDS carries significantly more risk than the benchmark, but that risk may result in overall higher return.
Returns for periods of less than one year are cumulative total returns. The fund commenced operations on January 15, 2025, therefore the performance in the period above reflects only a partial time period.
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please call 800-617-0004 for performance data current to the most recent month end.
High Yields, Steady Current Income
BNDS’ strategy demonstrates how active management can create value in today's challenging fixed income landscape. By focusing on infrastructure-related sectors with strong asset bases and predictable cash flows, the fund targets securities that traditional broad-market indices often overlook or underweight. The team's ability to identify mispriced opportunities in energy pipelines, telecom infrastructure, and real estate debt has resulted in a portfolio that delivers current income while maintaining potential for capital appreciation.
For investors seeking an alternative to traditional bond allocations, BNDS is a potential consideration. The fund's current 7.23% SEC yield is a premium to broad market benchmarks, while its focus on infrastructure assets provides exposure to services that historically have generated stable cash flows in most economic cycles. However, investors should be mindful of the concentrated sector allocation and credit risk inherent in high-yield moderately leveraged strategies.
As markets continue to evolve, BNDS seems like the type of specialized, actively managed approach that may be necessary to navigate an increasingly complex fixed income environment while still maintaining a stable current income.
Sources:
1 https://www.infracapfund.com/bnds/prospectus
About Us
Jay D. Hatfield is CEO of Infrastructure Capital Advisors and is the lead portfolio manager of the Infrastructure Capital Bond Income ETF (NYSE: BNDS), InfraCap Small Cap Income ETF (NYSE: SCAP), InfraCap Equity Income Fund ETF (NYSE: ICAP), InfraCap MLP ETF (NYSE: AMZA), Virtus InfraCap U.S. Preferred Stock ETF (NYSE: PFFA), InfraCap REIT Preferred ETF (NYSE: PFFR) and private funds. Each month Infrastructure Capital hosts a monthly economic webinar; you can sign up to attend by visiting our website www.infracapfunds.com (important disclosures can also be found on the website). For a prospectus please reach out to us or visit the links above for each respective fund.
DISCLOSURE
This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA's appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA's trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.
The information contained herein represents our subjective belief and opinions and should not be construed as investment, tax, legal, or financial advice. Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. Please read the prospectus carefully before investing. For more information about the Fund, Fund strategies or Infrastructure Capital, please reach out to Craig Starr at 212-763-8336 (Craig.Starr@icmllc.com). The Funds are distributed either by Quasar Distributors, LLC or by VP Distributors, LLC, an affiliate of Virtus ETF Advisers, LLC. ICAP, SCAP, and BNDS ETFs are distributed by Quasar Distributors LLC. PFFA, PFFR, and AMZA ETFs are distributed by VP Distributors, LLC an affiliated of Virtus ETF Advisers, LLC.