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Is WisdomTree U.S. High Yield Corporate Bond ETF (WFHY) a Strong ETF Right Now?
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Launched on 04/27/2016, the WisdomTree U.S. High Yield Corporate Bond ETF (WFHY - Free Report) is a smart beta exchange traded fund offering broad exposure to the High-Yield/Junk Bond ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
WFHY is managed by Wisdomtree, and this fund has amassed over $205.44 million, which makes it one of the average sized ETFs in the High-Yield/Junk Bond ETFs. Before fees and expenses, this particular fund seeks to match the performance of the WisdomTree Fundamental U.S. High Yield Corporate Bond Index.
The WisdomTree U.S. High Yield Corporate Bond Index is a rule-based alternatively weighted Index designed to capture the performance of selected issuers in the U.S. high yield corporate bond market that are deemed to have attractive fundamental and income characteristics.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for WFHY are 0.38%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 5.78%.
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, Nationstar Mtg Hld Inc 6% 1/15/2027 accounts for about 0.92% of total assets, followed by Frontier Communications 5% 5/1/2028 and Chs/community Health Sys 4.75% 2/15/2031.
WFHY's top 10 holdings account for about 7.18% of its total assets under management.
Performance and Risk
So far this year, WFHY return is roughly 1.43%, and it's up approximately 0.45% in the last one year (as of 05/24/2023). During this past 52-week period, the fund has traded between $42.47 and $47.89.
WFHY has a beta of 0.47 and standard deviation of 8.89% for the trailing three-year period. With about 442 holdings, it effectively diversifies company-specific risk.
Alternatives
WisdomTree U.S. High Yield Corporate Bond ETF is a reasonable option for investors seeking to outperform the High-Yield/Junk Bond ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Broad USD High Yield Corporate Bond ETF (USHY - Free Report) tracks BofA Merrill Lynch U.S. High Yield Constrained Index and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG - Free Report) tracks Markit iBoxx USD Liquid High Yield Index. IShares Broad USD High Yield Corporate Bond ETF has $8.95 billion in assets, iShares iBoxx $ High Yield Corporate Bond ETF has $13.05 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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Is WisdomTree U.S. High Yield Corporate Bond ETF (WFHY) a Strong ETF Right Now?
Launched on 04/27/2016, the WisdomTree U.S. High Yield Corporate Bond ETF (WFHY - Free Report) is a smart beta exchange traded fund offering broad exposure to the High-Yield/Junk Bond ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
WFHY is managed by Wisdomtree, and this fund has amassed over $205.44 million, which makes it one of the average sized ETFs in the High-Yield/Junk Bond ETFs. Before fees and expenses, this particular fund seeks to match the performance of the WisdomTree Fundamental U.S. High Yield Corporate Bond Index.
The WisdomTree U.S. High Yield Corporate Bond Index is a rule-based alternatively weighted Index designed to capture the performance of selected issuers in the U.S. high yield corporate bond market that are deemed to have attractive fundamental and income characteristics.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for WFHY are 0.38%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 5.78%.
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, Nationstar Mtg Hld Inc 6% 1/15/2027 accounts for about 0.92% of total assets, followed by Frontier Communications 5% 5/1/2028 and Chs/community Health Sys 4.75% 2/15/2031.
WFHY's top 10 holdings account for about 7.18% of its total assets under management.
Performance and Risk
So far this year, WFHY return is roughly 1.43%, and it's up approximately 0.45% in the last one year (as of 05/24/2023). During this past 52-week period, the fund has traded between $42.47 and $47.89.
WFHY has a beta of 0.47 and standard deviation of 8.89% for the trailing three-year period. With about 442 holdings, it effectively diversifies company-specific risk.
Alternatives
WisdomTree U.S. High Yield Corporate Bond ETF is a reasonable option for investors seeking to outperform the High-Yield/Junk Bond ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Broad USD High Yield Corporate Bond ETF (USHY - Free Report) tracks BofA Merrill Lynch U.S. High Yield Constrained Index and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG - Free Report) tracks Markit iBoxx USD Liquid High Yield Index. IShares Broad USD High Yield Corporate Bond ETF has $8.95 billion in assets, iShares iBoxx $ High Yield Corporate Bond ETF has $13.05 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.