Making its debut on 11/12/2014, smart beta exchange traded fund FlexShares Credit-Scored US Corporate Bond ETF (SKOR) provides investors broad exposure to the Investment Grade Corporate 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.
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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Flexshares, and has been able to amass over $504.26 million, which makes it one of the average sized ETFs in the Investment Grade Corporate Bond ETFs. This particular fund seeks to match the performance of the Northern Trust Credit-Scored US Corporate Bond Index before fees and expenses.
The Northern Trust US Corporate Bond Quality Value Index measures the performance of a diversified universe of intermediate maturity, US - dollar denominated bonds of companies with investment grade credit quality, favourable valuations and enhanced short-term and long-term solvency.
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 0.15%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 4.91%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is 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.
Taking into account individual holdings, Federal National Mortgage Association Discount-3-26-2025 (FNMA) accounts for about 0.51% of the fund's total assets, followed by Citigroup Inc Callable Notes Variable 25/may/2034-6.17% (C) and Citigroup Inc Callable Notes Variable 24/jul/2028-3.67% (C).
SKOR's top 10 holdings account for about 3.03% of its total assets under management.
Performance and Risk
The ETF return is roughly 2.30% so far this year and was up about 7.85% in the last one year (as of 05/02/2025). In the past 52-week period, it has traded between $47.16 and $49.21.
SKOR has a beta of 0.22 and standard deviation of 5% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 1723 holdings, it effectively diversifies company-specific risk.
Alternatives
FlexShares Credit-Scored US Corporate Bond ETF is a reasonable option for investors seeking to outperform the Investment Grade Corporate Bond ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
SPDR Portfolio Intermediate Term Corporate Bond ETF (SPIB) tracks Bloomberg Barclays Intermediate U.S. Corporate Index and the Vanguard Intermediate-Term Corporate Bond ETF (VCIT) tracks Bloomberg Barclays U.S. 5-10 Year Corporate Bond Index. SPDR Portfolio Intermediate Term Corporate Bond ETF has $9.03 billion in assets, Vanguard Intermediate-Term Corporate Bond ETF has $51.30 billion. SPIB has an expense ratio of 0.04% and VCIT charges 0.03%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Investment Grade Corporate 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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FlexShares Credit-Scored US Corporate Bond ETF (SKOR): ETF Research Reports Citigroup Inc. (C): Free Stock Analysis Report Fannie Mae (FNMA): Free Stock Analysis Report Vanguard Intermediate-Term Corporate Bond ETF (VCIT): ETF Research Reports SPDR Portfolio Intermediate Term Corporate Bond ETF (SPIB): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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