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Is FlexShares High Yield Value-Scored Bond ETF (HYGV) a Strong ETF Right Now?
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Designed to provide broad exposure to the High-Yield/Junk Bond ETFs category of the market, the FlexShares High Yield Value-Scored Bond ETF (HYGV - Free Report) is a smart beta exchange traded fund launched on 07/17/2018.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Managed by Flexshares, HYGV has amassed assets over $1.48 billion, making it one of the larger ETFs in the High-Yield/Junk Bond ETFs. HYGV seeks to match the performance of the NORTHERN TRUST HY VLU-SCRD US CORP BD ID before fees and expenses.
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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.37% for HYGV, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 8.40%.
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, Intelsat Jackson Holdings Sa Callable Notes Fixed-6.50%-03-15-2030 (INTEL) accounts for about 1.13% of total assets, followed by Directv Financing Llc / Directv Financing-5.88% and Staples Inc Callable Notes Fixed 10.75%-09-01-2029 .
HYGV's top 10 holdings account for about 7.43% of its total assets under management.
Performance and Risk
The ETF has gained about 6.91% so far this year and was up about 13.51% in the last one year (as of 10/11/2024). In the past 52-week period, it has traded between $38.51 and $41.67.
The fund has a beta of 0.50 and standard deviation of 8.79% for the trailing three-year period. With about 1025 holdings, it effectively diversifies company-specific risk.
Alternatives
FlexShares High Yield Value-Scored 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 iBoxx $ High Yield Corporate Bond ETF (HYG - Free Report) tracks Markit iBoxx USD Liquid High Yield Index and the iShares Broad USD High Yield Corporate Bond ETF (USHY - Free Report) tracks BofA Merrill Lynch U.S. High Yield Constrained Index. IShares iBoxx $ High Yield Corporate Bond ETF has $14.68 billion in assets, iShares Broad USD High Yield Corporate Bond ETF has $19.60 billion. HYG has an expense ratio of 0.49% and USHY charges 0.08%.
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 FlexShares High Yield Value-Scored Bond ETF (HYGV) a Strong ETF Right Now?
Designed to provide broad exposure to the High-Yield/Junk Bond ETFs category of the market, the FlexShares High Yield Value-Scored Bond ETF (HYGV - Free Report) is a smart beta exchange traded fund launched on 07/17/2018.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Managed by Flexshares, HYGV has amassed assets over $1.48 billion, making it one of the larger ETFs in the High-Yield/Junk Bond ETFs. HYGV seeks to match the performance of the NORTHERN TRUST HY VLU-SCRD US CORP BD ID before fees and expenses.
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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.37% for HYGV, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 8.40%.
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, Intelsat Jackson Holdings Sa Callable Notes Fixed-6.50%-03-15-2030 (INTEL) accounts for about 1.13% of total assets, followed by Directv Financing Llc / Directv Financing-5.88% and Staples Inc Callable Notes Fixed 10.75%-09-01-2029 .
HYGV's top 10 holdings account for about 7.43% of its total assets under management.
Performance and Risk
The ETF has gained about 6.91% so far this year and was up about 13.51% in the last one year (as of 10/11/2024). In the past 52-week period, it has traded between $38.51 and $41.67.
The fund has a beta of 0.50 and standard deviation of 8.79% for the trailing three-year period. With about 1025 holdings, it effectively diversifies company-specific risk.
Alternatives
FlexShares High Yield Value-Scored 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 iBoxx $ High Yield Corporate Bond ETF (HYG - Free Report) tracks Markit iBoxx USD Liquid High Yield Index and the iShares Broad USD High Yield Corporate Bond ETF (USHY - Free Report) tracks BofA Merrill Lynch U.S. High Yield Constrained Index. IShares iBoxx $ High Yield Corporate Bond ETF has $14.68 billion in assets, iShares Broad USD High Yield Corporate Bond ETF has $19.60 billion. HYG has an expense ratio of 0.49% and USHY charges 0.08%.
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.