Designed to provide broad exposure to the High-Yield/Junk Bond ETFs category of the market, the Invesco Fundamental High Yield Corporate Bond ETF (PHB) is a smart beta exchange traded fund launched on 11/15/2007.
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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $336.42 million, which makes it one of the average sized ETFs in the High-Yield/Junk Bond ETFs. PHB seeks to match the performance of the RAFI Bonds US High Yield 1-10 Index before fees and expenses.
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
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.50%.
The fund has a 12-month trailing dividend yield of 5.84%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Walgreens Boots Alliance Inc-3.45%-06-01-2026 (931427AQ1) accounts for about 1.64% of the fund's total assets, followed by Albertsons Cos Inc / Safeway Inc / New Albertsons Lp / Alber-6.25%-03-15-2033 (01309QAB4) and Windsor Holdings Iii Llc-8.50%-06-15-2030 (97360AAA5).
PHB's top 10 holdings account for about 10.93% of its total assets under management.
Performance and Risk
The ETF has gained about 2.88% and was up about 7.80% so far this year and in the past one year (as of 05/30/2025), respectively. PHB has traded between $17.50 and $18.61 during this last 52-week period.
The ETF has a beta of 0.39 and standard deviation of 7.12% for the trailing three-year period, making it a high risk choice in the space. With about 266 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco Fundamental High Yield Corporate 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 $16.08 billion in assets, iShares Broad USD High Yield Corporate Bond ETF has $22.50 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.
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Invesco Fundamental High Yield Corporate Bond ETF (PHB): ETF Research Reports iShares iBoxx $ High Yield Corporate Bond ETF (HYG): ETF Research Reports iShares Broad USD High Yield Corporate Bond ETF (USHY): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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