Is the FlexShares High Yield ValueScored Bond ETF (HYGV) a strong ETF right now?

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MDebuting on 7/17/2018, the Smart Beta FlexShares High Yield ValueScored Bond ETF (HYGV) listed index fund offers investors broad exposure to the High Yield/Junk Bond ETFs category of the market.

What are Smart Beta ETFs?

The ETF industry has long been awash with products based on market-cap-weighted indices designed to represent the entire market or a particular market segment.

Market-cap-weighted indices offer an inexpensive, convenient, and transparent way to replicate market returns and are a good option for investors who believe in market efficiency.

But some investors prefer to invest in smart beta funds; these funds follow non-cap-weighted strategies and are a great option for those who prefer picking great stocks to beat the market.

These indices attempt to select stocks that have a better chance of risk-return performance, based on certain fundamental characteristics or a combination of these characteristics.

This area offers many different investment choices, such as the simplest equal weighting, fundamental weighting, and volatility/momentum based weighting methodologies; however, not all of these strategies can yield superior results.

Fund Sponsor and Index

Given that the fund has raised over $711.14 million, this makes it one of the mid-sized ETFs among high yield/junk bond ETFs. HYGV is managed by Flexshares. Before fees and expenses, this particular fund seeks to match the performance of the NORTHERN TRUST HY VLU-SCRD US CORP BD ID.

The Northern Trust High Yield Value-Scored US Corporate Bond Index measures the performance of a diversified universe of US dollar-denominated high yield corporate bonds with favorable fundamentals, market valuations and liquidity.

Cost and other expenses

Expense ratios are an important factor in an ETF’s performance and over the long term cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

The annual operating expense for HYGV is 0.37%, putting it on par with most peer products in the space.

Its 12-month dividend yield is 6.35%.

Sector exposure and main holdings

ETFs provide diversified exposure and thus minimize single-stock risk, but it’s 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.

When you look at individual holdings, Altice France Sa (france)-5.12%-7-15-2029 represents around 0.69% of the fund’s total assets, followed by Csc Holdings Llc-5.75%-1 -15-2030 (BKFH0Y9) and Staples Inc-7.50%-15-4-2026.

HYGV’s top 10 holdings represent approximately 5.65% of its total assets under management.

Performance and risks

The ETF has lost around -4.77% and is up around 0.32% so far this year and over the past year (as of 02/23/2022), respectively. HYGV traded between $46.48 and $50.17 during this last 52-week period.

The fund has a beta of 0.46 and a standard deviation of 11.14% for the three-year period. With approximately 879 holdings, it effectively diversifies company-specific risks.

Alternatives

The FlexShares High Yield ValueScored Bond ETF is not a suitable option for investors looking to outperform the High Yield/Junk Bond ETFs segment of the market. Instead, there are other ETFs in the space that investors should consider.

The SPDR Bloomberg High Yield Bond ETF (JNK) tracks the Bloomberg Barclays High Yield Very Liquid Index and the iShares iBoxx High Yield Corporate Bond ETF (HYG) tracks the Markit iBoxx USD Liquid High Yield Index. SPDR Bloomberg High Yield Bond ETF has $7.70 billion in assets, iShares iBoxx High Yield Corporate Bond ETF has $16.52 billion. JNK has an expense ratio of 0.40% and HYG charges 0.48%.

Investors looking for cheaper, lower-risk options should consider traditional market-cap-weighted ETFs that aim to match the returns of high-yield/junk bond ETFs.

Conclusion

To learn more about this product and other ETFs, find products that fit your investment goals, and read articles about the latest developments in the ETF investment universe, please visit Zacks ETF Center.

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FlexShares High Yield ValueScored Bond ETF (HYGV): ETF Research Reports

SPDR Bloomberg High Yield Bond ETF (JNK): ETF Research Reports

iShares iBoxx High Yield Corporate Bond ETF (HYG): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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