Yahoo Finance Is Invesco Fundamental High Yield Corporate Bond ETF (PHB) a Strong ETF Right Now?
The Invesco Fundamental High Yield Corporate Bond ETF (PHB) made its debut on 11/15/2007, 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?
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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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 Invesco, and has been able to amass over $558.03 million, which makes it one of the larger ETFs in the High-Yield/Junk Bond ETFs. Before fees and expenses, this particular fund seeks to match the performance of the RAFI Bonds US High Yield 1-10 Index.
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
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.
Operating expenses on an annual basis are 0.50% for PHB, making it on par with most peer products in the space.
PHB's 12-month trailing dividend yield is 3.78%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Centene Corp-4.62%-12-15-2029 accounts for about 2.28% of total assets, followed by Synchrony Financial-7.25%-02-02-2033 and United Airlines Holdings Inc-4.88%-01-15-2025.
The top 10 holdings account for about 16.32% of total assets under management.
Performance and Risk
So far this year, PHB has added roughly 2.95%, and it's up approximately 0.25% in the last one year (as of 06/01/2023). During this past 52-week period, the fund has traded between $16.37 and $17.88.
The ETF has a beta of 0.43 and standard deviation of 7.25% for the trailing three-year period, making it a high risk choice in the space. With about 162 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 Broad USD High Yield Corporate Bond ETF (USHY) tracks BofA Merrill Lynch U.S. High Yield Constrained Index and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) tracks Markit iBoxx USD Liquid High Yield Index. IShares Broad USD High Yield Corporate Bond ETF has $8.77 billion in assets, iShares iBoxx $ High Yield Corporate Bond ETF has $14.71 billion. USHY has an expense ratio of 0.15% and HYG charges 0.48%.
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 Reports
