New York, NY – Exchange-traded funds (ETFs) have become a popular investment option for many individuals seeking diversified exposure to various asset classes. One ETF that has garnered attention is the FlexShares® High Yield Value-Scored Bond Index Fund ETF (HYGV), which focuses on high-yield corporate bonds, commonly referred to as “junk bonds.”

HYGV, with 1,048 holdings, offers investors a distribution rate of 8.49% and a 30-day SEC yield of 7.44%. Since its launch in 2018, HYGV has been tracking the Northern Trust High Yield Value-Scored US Corporate Bond Index. The underlying index utilizes a rules-based methodology to select and weight U.S.-listed, US-dollar denominated bonds below investment grade, based on value, credit, and liquidity scores derived from company filings.

The fund’s portfolio is heavily invested in U.S. companies, with a significant emphasis on industrials, accounting for 36.7% of assets. The top 10 holdings make up 7.1% of the total portfolio, with a notable portion allocated to BB-rated securities, the highest rating for junk bonds.

When compared to other high-yield corporate bond ETFs, HYGV stands out with its high four-year average yield. However, performance metrics indicate that HYGV has lagged behind “fallen angels” bond ETFs in total returns since its inception in 2018.

Despite its strengths, HYGV has faced challenges, including a decline in value since its inception and a distribution history that has not kept pace with inflation. As a result, some investors may view HYGV as a less attractive long-term investment option, potentially warranting a “Sell” rating.

In conclusion, while HYGV offers unique features and potential benefits, investors should carefully consider its performance and risk factors before incorporating it into their investment portfolio.