Is Invesco Fundamental High Yield Corporate Bond ETF (PHB) a Strong ETF Right Now?

The Invesco Fundamental High Yield Corporate Bond ETF (PHB) made its debut on 11/15/2007, and is a smart beta exchange traded fund that provides broad exposure to the High-Yield/Junk Bond ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

PHB is managed by Invesco, and this fund has amassed over $353.88 million, which makes 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 RAFI Bonds US High Yield 1-10 Index.

The RAFI Bonds US High Yield 1-10 Index is comprised of US dollar-denominated bonds that are registered with the SEC or that are Rule 144A securities that provide for registration rights and whose issuers are public companies listed on a major US stock exchange.

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.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.50%.

It has a 12-month trailing dividend yield of 5.53%.

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, Invesco Government & Agency Portfolio (AGPXX) accounts for about 1.84% of the fund's total assets, followed by Albertsons Cos Inc / Safeway Inc / New Albertsons Lp / Alber-6.25%-03-15-2033 (01309QAB4) and Pg&e Corp-5.25%-07-01-2030 (69331CAJ7).

Its top 10 holdings account for approximately 11% of PHB's total assets under management.

Performance and Risk

Year-to-date, the Invesco Fundamental High Yield Corporate Bond ETF has added about 7.22% so far, and it's up approximately 6.1% over the last 12 months (as of 10/02/2025). PHB has traded between $17.50 $18.72 in this past 52-week period.

The fund has a beta of 0.38 and standard deviation of 6.04% for the trailing three-year period, which makes PHB a high risk choice in this particular space. With about 267 holdings, it effectively diversifies company-specific risk .

Alternatives

Invesco Fundamental High Yield Corporate Bond ETF is a reasonable option for investors seeking to outperform the High-Yield/Junk Bond ETFs segment of the market. However, there are other ETFs in the space which investors could 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 $18.26 billion in assets, iShares Broad USD High Yield Corporate Bond ETF has $25.48 billion. HYG has an expense ratio of 0.49% and USHY changes 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

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research