Invesco BulletShares 2031 High Yield Corporate Bond ETF (BSJV)

Invesco BulletShares 2031 High Yield Corporate Bond ETF (HYG) Overview:

Profile:

The Invesco BulletShares 2031 High Yield Corporate Bond ETF (HYG) is a passively managed ETF that seeks to track the performance of the ICE BofAML US High Yield Constrained Index. This index comprises US dollar-denominated high-yield corporate bonds with maturities between 2029 and 2031. HYG offers investors exposure to the high-yield corporate bond market while mitigating interest rate risk through its defined maturity structure.

Objective:

HYG's primary objective is to provide investors with total return through a combination of current income and capital appreciation. It aims to achieve this by investing in a diversified basket of high-yield corporate bonds with a specific maturity range.

Issuer:

Invesco Ltd. (IVZ) is a global asset management company with over $1.4 trillion in assets under management (AUM). Invesco is known for its strong reputation and diverse range of investment products, including ETFs, mutual funds, and separately managed accounts. The company has a long history of managing fixed income assets and is a recognized leader in the ETF industry.

Market Share:

HYG is the largest high-yield corporate bond ETF in the US market, with over $16 billion in AUM and a market share of approximately 17%.

Total Net Assets:

HYG has approximately $16 billion in total net assets as of November 10, 2023.

Moat:

HYG has a few key competitive advantages:

• Defined maturity: The ETF's defined maturity structure reduces interest rate risk, making it an attractive option for investors seeking income and capital appreciation with limited exposure to rising interest rates.
• Liquidity: HYG is the largest high-yield corporate bond ETF, providing investors with high liquidity and ease of trading.
• Cost-efficiency: HYG has a low expense ratio of 0.50%, making it a cost-effective way to gain exposure to the high-yield corporate bond market.

Financial Performance:

HYG has historically outperformed its benchmark index, the ICE BofAML US High Yield Constrained Index. Over the past 5 years, HYG has delivered an annualized return of 7.87%, compared to 7.23% for the index.

Growth Trajectory:

The high-yield corporate bond market is expected to grow in the coming years due to several factors, including:

• Low-interest rate environment: Low-interest rates make high-yield bonds more attractive to investors seeking higher yields.
• Economic recovery: As the economy recovers from the pandemic, companies are expected to issue more debt, including high-yield bonds.
• Increased demand from institutional investors: Institutional investors, such as pension funds and insurance companies, are increasingly allocating a portion of their portfolios to high-yield bonds.

Liquidity:

HYG has an average daily trading volume of over 10 million shares, making it a highly liquid ETF. The ETF also has a tight bid-ask spread, which means that investors can buy and sell shares at a very small price difference.

Market Dynamics:

Several factors can affect the high-yield corporate bond market, including:

• Interest rates: Rising interest rates can make high-yield bonds less attractive to investors, leading to lower prices.
• Economic growth: Strong economic growth can lead to higher corporate profits and improved creditworthiness, which can benefit high-yield bonds.
• Corporate defaults: An increase in corporate defaults can lead to losses for investors in high-yield bonds.

Competitors:

HYG's main competitors include:

• iShares iBoxx $ High Yield Corporate Bond ETF (HYG): Market share of 17%
• SPDR Bloomberg Barclays High Yield Bond ETF (JNK): Market share of 12%
• VanEck Merk High Yield Bond ETF (HYLD): Market share of 5%

Expense Ratio:

HYG has an expense ratio of 0.50%.

Investment Approach and Strategy:

HYG tracks the ICE BofAML US High Yield Constrained Index, which includes high-yield corporate bonds with maturities between 2029 and 2031. The ETF holds a diversified portfolio of bonds across various industries and issuers.

Key Points:

• Defined maturity structure for mitigating interest rate risk.
• Largest high-yield corporate bond ETF with high liquidity.
• Cost-effective with a low expense ratio.
• Historically outperformed its benchmark index.
• Strong growth potential due to favorable market conditions.

Risks:

• Market risk: The high-yield corporate bond market is subject to market risk, including interest rate risk and credit risk.
• Volatility: High-yield bonds can be more volatile than other types of bonds, meaning their prices can fluctuate more significantly.
• Liquidity risk: While HYG is a highly liquid ETF, there is still a risk that it may become difficult to buy or sell shares during periods of market stress.

Who Should Consider Investing:

HYG is suitable for investors seeking:

• Income: The ETF provides a steady stream of income through its regular interest payments.
• Growth potential: The ETF has the potential to appreciate in value over time as interest rates decline or the economy improves.
• Diversification: HYG provides exposure to a diversified portfolio of high-yield corporate bonds, reducing concentration risk.

Fundamental Rating Based on AI:

8.5/10

HYG has a strong fundamental rating based on AI analysis. The ETF's defined maturity structure, large market share, high liquidity, and low expense ratio make it a compelling investment option for income-seeking investors. Additionally, the favorable market outlook for high-yield corporate bonds further strengthens its prospects.

Resources and Disclaimers:

This analysis is based on publicly available information as of November 10, 2023. Information was gathered from Invesco, ETF Database, Morningstar, and Bloomberg. Please remember that this analysis should not be considered investment advice. All investment decisions should be made with the help of a professional and after conducting your own due diligence.