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?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
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 managed by Flexshares, and has been able to amass over $1.09 billion, which makes it one of the larger ETFs in the High-Yield/Junk Bond ETFs. HYGV, before fees and expenses, 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
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 7.37%.
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, Cash (USD_CCASH) accounts for about 2.77% of the fund's total assets, followed by Carvana Co Sr Sec Pik 31-9.00%-6-1-2031 (146869AM4) and Tenneco Inc Callable Notes Fixed 8% 17/nov/2028 (880349AU9).
The top 10 holdings account for about 8.39% of total assets under management.
Performance and Risk
The ETF has added roughly 2.13% so far this year and is up roughly 5.61% in the last one year (as of 07/03/2026). In the past 52-week period, it has traded between $39.62 and $41.28
The fund has a beta of 0.40 and standard deviation of 5.31% for the trailing three-year period. With about 948 holdings, it effectively diversifies company-specific risk .
Alternatives
FlexShares High Yield Value-Scored Bond ETF is a reasonable option for investors seeking to outperform the High-Yield/Junk Bond ETFs segment of the market. However, there are other ETFs in the space which investors could 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 $17.57 billion in assets, iShares Broad USD High Yield Corporate Bond ETF has $28.28 billion. HYG has an expense ratio of 0.49% and USHY changes 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
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FlexShares High Yield Value-Scored Bond ETF (HYGV): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).