The FlexShares High Yield Value-Scored Bond ETF (HYGV) made its debut on 07/17/2018, 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?
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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
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.
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
The fund is sponsored by Flexshares. It has amassed assets over $1.29 billion, making it one of the larger ETFs in the High-Yield/Junk Bond ETFs. Before fees and expenses, HYGV 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 high yield, US-dollar denominated bonds of companies exhibiting favorable fundamental qualities, market valuations and liquidity.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.37%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 8.17%.
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.
Looking at individual holdings, Intelsat Jackson Holdings Sa Callable Notes Fixed-6.50%-3-15-2030 (INTEL) accounts for about 1.26% of total assets, followed by Carvana Co Sr Sec Pik 31-6-1-2031 (CVNA) and Directv Financing Llc / Directv Financing-5.88%-8-15-2027 (DTV).
HYGV's top 10 holdings account for about 8.74% of its total assets under management.
Performance and Risk
The ETF has lost about -1.65% and was up about 5.90% so far this year and in the past one year (as of 04/16/2025), respectively. HYGV has traded between $38.45 and $41.67 during this last 52-week period.
HYGV has a beta of 0.44 and standard deviation of 8.71% for the trailing three-year period. With about 1086 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 $15.53 billion in assets, iShares Broad USD High Yield Corporate Bond ETF has $19.04 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.
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
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 ReportsThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
