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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?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader 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 managed by Wisdomtree, and has been able to amass over $220.27 million, which makes it one of the average sized ETFs in the High-Yield/Junk Bond ETFs. This particular fund seeks to match the performance of the WisdomTree Fundamental U.S. High Yield Corporate Bond Index before fees and expenses.
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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.38% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 6.22%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Taking into account individual holdings, Ngl Enrgy Op/fin Corp 7.5% 2/1/2026 accounts for about 0.79% of the fund's total assets, followed by Nationstar Mtg Hld Inc 6% 1/15/2027 and Chs/community Health Sys 4.75% 2/15/2031.
Its top 10 holdings account for approximately 6.72% of WFHY's total assets under management.
Performance and Risk
The ETF has added roughly 2.93% so far this year and is up about 7.05% in the last one year (as of 10/02/2023). In the past 52-week period, it has traded between $42.84 and $46.19.
The fund has a beta of 0.47 and standard deviation of 8.60% for the trailing three-year period. With about 452 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 $8.96 billion in assets, iShares iBoxx $ High Yield Corporate Bond ETF has $13.59 billion. USHY has an expense ratio of 0.15% and HYG charges 0.49%.
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?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader 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 managed by Wisdomtree, and has been able to amass over $220.27 million, which makes it one of the average sized ETFs in the High-Yield/Junk Bond ETFs. This particular fund seeks to match the performance of the WisdomTree Fundamental U.S. High Yield Corporate Bond Index before fees and expenses.
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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.38% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 6.22%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Taking into account individual holdings, Ngl Enrgy Op/fin Corp 7.5% 2/1/2026 accounts for about 0.79% of the fund's total assets, followed by Nationstar Mtg Hld Inc 6% 1/15/2027 and Chs/community Health Sys 4.75% 2/15/2031.
Its top 10 holdings account for approximately 6.72% of WFHY's total assets under management.
Performance and Risk
The ETF has added roughly 2.93% so far this year and is up about 7.05% in the last one year (as of 10/02/2023). In the past 52-week period, it has traded between $42.84 and $46.19.
The fund has a beta of 0.47 and standard deviation of 8.60% for the trailing three-year period. With about 452 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 $8.96 billion in assets, iShares iBoxx $ High Yield Corporate Bond ETF has $13.59 billion. USHY has an expense ratio of 0.15% and HYG charges 0.49%.
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.