Launched on 04/27/2016, the WisdomTree U.S. High Yield Corporate Bond ETF (QHY) 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?
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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide 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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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 Wisdomtree, QHY has amassed assets over $216.86 million, making it one of the average sized ETFs in the High-Yield/Junk Bond ETFs. This particular fund, before fees and expenses, seeks to match the performance of the WISDOMTREE US HIGH YIELD CORP 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.38%.
The fund has a 12-month trailing dividend yield of 6.37%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Net Current Assets accounts for about 54.77% of the fund's total assets, followed by Dreyfus Trsy Oblig Cash Mgmt Cl Ins and Net Current Assets.
QHY's top 10 holdings account for about 107.42% of its total assets under management.
Performance and Risk
So far this year, QHY return is roughly 3.25%, and is up about 0% in the last one year (as of 12/20/2024). During this past 52-week period, the fund has traded between $44.85 and $46.48.
The ETF has a beta of 0.49. With about 485 holdings, it effectively diversifies company-specific risk.
Alternatives
WisdomTree U.S. 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 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 $15.45 billion in assets, iShares Broad USD High Yield Corporate Bond ETF has $19.70 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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