We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is Invesco Fundamental High Yield Corporate Bond ETF (PHB) a Strong ETF Right Now?
Read MoreHide Full Article
The Invesco Fundamental High Yield Corporate Bond ETF (PHB - Free Report) made its debut on 11/15/2007, and is a smart beta exchange traded fund that provides 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $642.96 million, which makes 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 RAFI Bonds US High Yield 1-10 Index.
The RAFI Bonds US High Yield 1-10 Index is comprised of US dollar-denominated bonds that are registered with the SEC or that are Rule 144A securities that provide for registration rights and whose issuers are public companies listed on a major US stock exchange.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.50% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 5.10%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Taking into account individual holdings, Synchrony Financial-7.25%-02-02-2033 accounts for about 1.26% of the fund's total assets, followed by United Airlines Holdings Inc-4.88%-01-15-2025 and Windsor Holdings Iii Llc-8.50%-06-15-2030.
PHB's top 10 holdings account for about 10.66% of its total assets under management.
Performance and Risk
The ETF has added about 1% and was up about 8.97% so far this year and in the past one year (as of 05/14/2024), respectively. PHB has traded between $16.83 and $18.21 during this last 52-week period.
PHB has a beta of 0.44 and standard deviation of 7.20% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 225 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco Fundamental High Yield Corporate 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 - 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 $11.69 billion in assets, iShares iBoxx $ High Yield Corporate Bond ETF has $14.93 billion. USHY has an expense ratio of 0.08% 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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Is Invesco Fundamental High Yield Corporate Bond ETF (PHB) a Strong ETF Right Now?
The Invesco Fundamental High Yield Corporate Bond ETF (PHB - Free Report) made its debut on 11/15/2007, and is a smart beta exchange traded fund that provides 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $642.96 million, which makes 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 RAFI Bonds US High Yield 1-10 Index.
The RAFI Bonds US High Yield 1-10 Index is comprised of US dollar-denominated bonds that are registered with the SEC or that are Rule 144A securities that provide for registration rights and whose issuers are public companies listed on a major US stock exchange.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.50% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 5.10%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Taking into account individual holdings, Synchrony Financial-7.25%-02-02-2033 accounts for about 1.26% of the fund's total assets, followed by United Airlines Holdings Inc-4.88%-01-15-2025 and Windsor Holdings Iii Llc-8.50%-06-15-2030.
PHB's top 10 holdings account for about 10.66% of its total assets under management.
Performance and Risk
The ETF has added about 1% and was up about 8.97% so far this year and in the past one year (as of 05/14/2024), respectively. PHB has traded between $16.83 and $18.21 during this last 52-week period.
PHB has a beta of 0.44 and standard deviation of 7.20% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 225 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco Fundamental High Yield Corporate 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 - 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 $11.69 billion in assets, iShares iBoxx $ High Yield Corporate Bond ETF has $14.93 billion. USHY has an expense ratio of 0.08% 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.