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) is a smart beta exchange traded fund launched on 07/17/2018.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $1.47 billion, this makes it one of the larger ETFs in the High-Yield/Junk Bond ETFs. HYGV is managed by Flexshares. 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
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 0.37% for this ETF, which makes it on par with most peer products in the space.
HYGV's 12-month trailing dividend yield is 8.19%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Intelsat Jackson Holdings Sa Callable Notes Fixed-6.50%-3-15-2030 (INTEL) accounts for about 1.11% of the fund's total assets, followed by Directv Financing Llc / Directv Financing-5.88%-8-15-2027 (DTV) and Carvana Co Sr Sec Pik 31-6-1-2031 (CVNA).
Its top 10 holdings account for approximately 7.16% of HYGV's total assets under management.
Performance and Risk
The ETF has added about 8.61% and is up roughly 11.51% so far this year and in the past one year (as of 12/12/2024), respectively. HYGV has traded between $39.93 and $41.67 during this last 52-week period.
HYGV has a beta of 0.50 and standard deviation of 8.74% for the trailing three-year period. With about 1085 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) tracks Markit iBoxx USD Liquid High Yield Index and the iShares Broad USD High Yield Corporate Bond ETF (USHY) tracks BofA Merrill Lynch U.S. High Yield Constrained Index. IShares iBoxx $ High Yield Corporate Bond ETF has $15.85 billion in assets, iShares Broad USD High Yield Corporate Bond ETF has $20.43 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
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Get it free >>FlexShares High Yield Value-Scored Bond ETF (HYGV): ETF Research Reports
iShares iBoxx $ High Yield Corporate Bond ETF (HYG): ETF Research Reports
Carvana Co. (CVNA) : Free Stock Analysis Report
iShares Broad USD High Yield Corporate Bond ETF (USHY): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
