Is FlexShares High Yield ValueScored Bond ETF (HYGV) a Strong ETF Right Now?
Making its debut on 07/17/2018, smart beta exchange traded fund FlexShares High Yield ValueScored Bond ETF (HYGV) provides investors broad exposure to the High-Yield/Junk Bond ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is sponsored by Flexshares. It has amassed assets over $879.72 million, making it one of the larger ETFs in the High-Yield/Junk Bond ETFs. Before fees and expenses, this particular fund seeks to match the performance of the NORTHERN TRUST HY VLU-SCRD US CORP BD ID.
The Northern Trust High Yield Value-Scored US Corporate Bond Index measures the performance of a diversified universe of high yield, US-dollar denominated bonds of companies exhibiting favorable fundamental qualities, market valuations and liquidity.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.37%.
It's 12-month trailing dividend yield comes in at 8.04%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Cash (INTEL) accounts for about 1.16% of total assets, followed by Intelsat Jackson Hldgs S A (MCFE) and Condor Merger Sub Inc Callable Notes Fixed 7.375% (AAL).
HYGV's top 10 holdings account for about 6.21% of its total assets under management.
Performance and Risk
The ETF has lost about -13.62% so far this year and is down about -12.06% in the last one year (as of 11/01/2022). In the past 52-week period, it has traded between $38.86 and $49.82.
The fund has a beta of 0.49 and standard deviation of 12.68% for the trailing three-year period. With about 981 holdings, it effectively diversifies company-specific risk.
Alternatives
FlexShares High Yield ValueScored Bond ETF is not a suitable option for investors seeking to outperform the High-Yield/Junk Bond ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares Broad USD High Yield Corporate Bond ETF (USHY) tracks BofA Merrill Lynch U.S. High Yield Constrained Index and the iShares iBoxx High Yield Corporate Bond ETF (HYG) tracks Markit iBoxx USD Liquid High Yield Index. IShares Broad USD High Yield Corporate Bond ETF has $8.05 billion in assets, iShares iBoxx High Yield Corporate Bond ETF has $14.07 billion. USHY has an expense ratio of 0.15% and HYG charges 0.48%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the High-Yield/Junk Bond ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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FlexShares High Yield ValueScored Bond ETF (HYGV): ETF Research Reports
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
iShares iBoxx High Yield Corporate Bond ETF (HYG): ETF Research Reports
iShares Broad USD High Yield Corporate Bond ETF (USHY): ETF Research Reports
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