HYSA Sector Rotation Strategy Signals Resilience | ETF Trends

The fate of potential interest rate changes from the Federal Reserve is still up in the air. But, high-yield bond sector ETFs remain a robust option for investors. Aside from the direct benefit of diversifying portfolios, many high-yield sectors are generally less correlated to shifting interest rates. This makes high-yield bond sector ETFs a great choice for investors looking to blunt the potential impact other funds could face from the Federal Reserve.

Investors seeking an investment opportunity that casts a wider net of high-yield bond sectors can find much to appreciate in the BondBloxx USD High Yield Bond Sector Rotation ETF (NYSE Arca: HYSA). HYSA is actively managed ETF-of-ETFs and aims to distribute asset holdings among BondBloxx’s high-yield bond sector ETFs. The fund is a relatively new addition to BondBloxx’s extensive library of bond ETFs, launching in September 2023.

Branching Out

Due to the rotating nature of HYSA, the fund holds larger allocations in certain sectors. Nearly 25% of HYSA’s assets are currently held in the BondBloxx USD High Yield Bond Industrial Sector ETF (NYSE Arca: XHYI). XHYI allocates holdings to high-yield corporate bonds throughout the industrial sector. The fund has enjoyed robust success. It is up 10.35% over the last 12 months and rising 3.47% in the last three months.

The BondBloxx USD High Yield Bond Telecom, Media & Technology Sector ETF (NYSE Arca: XHYT) is another priority holding for the fund, representing roughly 22% of HYSA’s assets. XHYT’s holdings focus on high-yield corporate bonds from the telecom, media, and technology sectors. Over the last 12 months, XHYT has risen 8.63%, while being up 2.92% over the last three months.

Other large holdings for HYSA include the BondBloxx USD High Yield Bond Consumer Cyclicals Sector ETF (NYSE Arca: XHYC) and the BondBloxx USD High Yield Bond Financial & REIT Sector ETF (NYSE Arca: XHYF). Each fund weighs in at 12%-13% of HYSA’s portfolio. XHYC focuses attention on the consumer cyclicals sector, while XHYF looks at the financial and REIT sector. Each of these funds is overperforming FactSet averages over 12 months, with XHYC up 12.11% and XHYF up 10.99%.

Looking at the components of HYSA as a whole, the fund’s unique high-yield sector rotating strategy can provide investors with a vehicle to maximize returns while negating some of the dangers present with potential interest rate changes. The fund also has the additional benefit of being managed by Macquarie Asset Management. In times of uncertainty, active managers can be nimble and adaptive to the changing economic landscape.

HYSA operates with a net expense ratio of 0.55%. The fund is up 4.29% in the last three months and is up 0.68% YTD. In February 2024 alone, HYSA logged a net flow of $4.34 million.

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