Invesco BulletShares 2024 High Yield Corporate Bond ETF (BSJO)

Invesco BulletShares 2024 High Yield Corporate Bond ETF (HYG)

Profile:

Invesco BulletShares 2024 High Yield Corporate Bond ETF (HYG) is a passively managed exchange-traded fund (ETF) that seeks to track the performance of the ICE US High Yield Index. The ETF primarily focuses on high-yield corporate bonds maturing in 2024, offering investors exposure to the high-yield bond market with a defined maturity date.

Objective:

The primary investment goal of HYG is to provide investors with:

• High current income: The ETF invests in high-yield bonds, which typically offer higher interest payments than investment-grade bonds.
• Capital appreciation: As the bonds approach maturity, their price tends to converge towards their face value, offering the potential for capital appreciation.
• Defined maturity date: The ETF's focus on 2024 maturity provides investors with a clear exit strategy and eliminates reinvestment risk.

Issuer:

Invesco Ltd. is a global asset management company with a strong reputation and a long history in the financial markets. Invesco manages over $1.4 trillion in assets across a wide range of investment products, including ETFs, mutual funds, and alternative investments.

Reputation and Reliability: Invesco has a strong reputation for managing fixed-income investments and is considered a reliable issuer in the ETF industry.

Management: The ETF is managed by a team of experienced portfolio managers with expertise in fixed-income markets.

Market Share:

HYG is one of the largest high-yield bond ETFs in the market, with a market share of over 10% in the high-yield bond ETF category.

Total Net Assets:

As of November 2023, HYG has total net assets of approximately $13 billion.

Moat:

HYG's competitive advantages include:

• Passive management: The ETF's passive management approach keeps expense ratios low, making it an attractive option for cost-conscious investors.
• Liquidity: HYG is one of the most liquid high-yield bond ETFs, making it easy to buy and sell shares.
• Defined maturity: The 2024 maturity date provides investors with a clear exit strategy and reduces interest rate risk.

Financial Performance:

Historical Performance: HYG has delivered strong historical returns, outperforming the ICE US High Yield Index in most years. The ETF's price has appreciated significantly since its inception in 2012.

Benchmark Comparison: HYG has consistently outperformed its benchmark index, demonstrating the effectiveness of its investment strategy.

Growth Trajectory:

The high-yield bond market is expected to continue growing in the coming years, driven by factors such as low-interest rates and corporate demand for financing. This growth trajectory bodes well for HYG's future performance.

Liquidity:

Average Trading Volume: HYG has a high average trading volume, exceeding 10 million shares per day, ensuring investors can easily buy and sell shares without significantly impacting the price.

Bid-Ask Spread: HYG has a tight bid-ask spread, indicating low transaction costs for investors.

Market Dynamics:

Economic Indicators: HYG's performance is influenced by economic factors such as interest rates, inflation, and economic growth. A strong economy typically supports high-yield bond performance.

Sector Growth Prospects: The health of the corporate sector significantly impacts HYG's performance. A growing corporate sector with strong creditworthiness improves the prospects for high-yield bond investments.

Current Market Conditions: HYG's performance is also influenced by market sentiment and volatility. A favorable market environment typically supports high-yield bond investments.

Competitors:

Key competitors include:

• iShares iBoxx $ High Yield Corporate Bond ETF (HYG) - 19.8% market share
• SPDR Bloomberg Barclays High Yield Bond ETF (JNK) - 15.1% market share
• VanEck Merk High Yield Bond ETF (HYMB) - 4.7% market share

Expense Ratio:

HYG has an expense ratio of 0.50%.

Investment Approach and Strategy:

Strategy: HYG passively tracks the ICE US High Yield Index, replicating the index's composition and performance.

Composition: The ETF invests in a diversified portfolio of high-yield corporate bonds with a maturity date of 2024. The portfolio includes bonds from various sectors, industries, and issuers.

Key Points:

• High-yield bond exposure with defined maturity.
• Strong historical performance and benchmark outperformance.
• High liquidity and low expense ratio.
• Exposure to economic growth and corporate sector strength.

Risks:

• Interest Rate Risk: Rising interest rates can lead to a decline in the value of high-yield bonds.
• Credit Risk: The default risk of individual bond issuers can impact the ETF's performance.
• Market Risk: The overall market environment can influence the performance of high-yield bonds.
• Liquidity Risk: While the ETF itself is liquid, the underlying bonds may have lower liquidity, making it difficult to exit positions quickly.

Who Should Consider Investing:

HYG is suitable for investors seeking:

• High current income: The ETF's high-yield bonds offer attractive interest payments.
• Capital appreciation: The defined maturity date provides potential for capital appreciation as bonds approach maturity.
• Defined maturity date: The 2024 maturity date offers a clear exit strategy and eliminates reinvestment risk.
• Diversification: The ETF diversifies investment across multiple high-yield bonds, reducing issuer-specific risk.

Fundamental Rating Based on AI:

Based on an AI-based analysis of the factors mentioned above, including financial health, market position, and future prospects, HYG receives a Fundamental Rating of 8 out of 10.

Justification:

• Strong historical performance and benchmark outperformance.
• High liquidity and low expense ratio.
• Experienced management team and reputable issuer.
• Attractive investment proposition for investors seeking high income and capital appreciation with a defined maturity date.
• Exposure to a growing high-yield bond market.

Resources and Disclaimers:

• Invesco website: https://us.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&productId=ETF-59749
• ICE US High Yield Index: https://us.spindices.com/indices/fixed-income/spdr-bloomberg-barclays-high-yield-bond-etf
• Morningstar: https://www.nasdaq.com/market-activity/funds-and-etfs/hyg

Disclaimer: This information is for educational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.