While Investors Jump Back Into High Yield, This ETF Focuses on Value

An influx of bond investors are heading back into high yield, making exchange traded funds (ETFs) like the FlexShares High Yield Value-Scored Bond Index Fund (HYGV) an option to consider.

While the threat of inflation and rising interest rates may be spooking the capital markets, bond investors may be looking to stay a step ahead with high-yield options. While a rise in risk appetite is apparent, investors may not want to take on the riskiest debt while the economy is still in recovery mode.

“Investors are rushing back into U.S. junk bonds with funds that buy the risky debt seeing the biggest inflows since April,” a Bloomberg article said. “The funds received $2.3 billion of cash in the week ended Oct. 20, the biggest influx since the week ended April 7, according to Refinitiv Lipper data. It shows a shift in risk appetite following two straight weeks of outflows, including a $1.8 billion withdrawal last week, the most since June.”

HYGV seeks investment results that generally correspond to the price and yield performance of the Northern Trust High Yield Value-Scored U.S. Corporate Bond Index, which reflects the performance of a broad universe of U.S.-dollar denominated high-yield corporate bonds and seeks a higher total return than the overall high-yield corporate bond market, as represented by the Northern Trust High Yield U.S. Corporate Bond Index.

Big on Yield, But Also Big on Value

As mentioned, high-yield investing may involve taking on more debt than an investor needs in order to get extra yield. With a 4.68% distribution yield, investors can not only get yield, but also value with quality holdings.

HYGV uses a multi-factor approach that looks specifically at value, quality, and liquidity. Based on these factors, a potential investment is assigned a score, and only the best holdings that can provide the highest income paired with the highest quality make the fund.

“Our multi-factor approach represents the kind of innovation that, in our view, is needed to help investors pursue higher levels of potential income in our current low market interest rate environment,” a FlexShares Fund Focus noted.

“The FlexShares High Yield Value-Scored Bond Index Fund (HYGV) is designed to address the needs of these investors and the conditions of today’s fixed-income markets by employing multi-factor selection criteria and diversification controls that we believe may enhance the portfolio’s risk-adjusted returns,” the Fund Focus added.

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