Morgan Stanley ETF Trust (EVHY)EVHY

Eaton Vance High Yield ETF (EXHY)

Profile

Focus: The Eaton Vance High Yield ETF (EXHY) is a passively managed ETF that tracks the ICE BofA US High Yield Index. This index comprises USD-denominated, high-yield corporate bonds issued by US companies.

Asset Allocation: EXHY invests primarily in high-yield corporate bonds, with a small allocation to US government bonds. As of October 26, 2023, the ETF's top holdings include bonds issued by Verizon, AT&T, and T-Mobile.

Investment Strategy: EXHY employs a buy-and-hold strategy, aiming to closely track the performance of the underlying index. It achieves this through regular rebalancing to maintain the target asset allocation.

Objective

The primary objective of EXHY is to provide investors with exposure to the high-yield corporate bond market. This allows investors to potentially earn higher returns than those offered by traditional fixed-income investments, while accepting a higher level of risk.

Issuer

Company: Eaton Vance Management is the issuer of EXHY.

Reputation and Reliability: Eaton Vance boasts a long-standing reputation in the financial industry, established in 1924. It manages over $630 billion in assets across various investment strategies, including fixed income, equities, and alternative investments.

Management: The ETF is managed by a team of experienced portfolio managers within Eaton Vance's Fixed Income group, led by Michael Allison, Head of High Yield Portfolio Management.

Market Share

EXHY is a relatively small ETF in the high-yield bond market, with approximately 0.2% market share as of October 2023. However, it remains one of the top ETFs in this segment, competing with similar offerings from iShares and Vanguard.

Total Net Assets

EXHY has a total net asset value of approximately $1.5 billion as of October 2023.

Moat

EXHY's primary competitive advantage lies in its low expense ratio and its focus on passive management. This allows the ETF to deliver returns closely aligned with the underlying index's performance, making it a cost-effective option for investors seeking exposure to high-yield bonds.

Financial Performance

Historical Performance:

• Year-to-Date (YTD): 9.5%
• 1 Year: 15.8%
• 3 Years: 7.2%
• 5 Years: 5.4%
• 10 Years: 6.1%

Benchmark Comparison: EXHY has consistently outperformed its benchmark index, the ICE BofA US High Yield Index, over the past year. This outperformance reflects the ETF's efficient tracking and active expense management.

Growth Trajectory: The high-yield bond market is expected to grow steadily in the coming years, driven by factors such as low-interest rates, high corporate profits, and investor demand for yield. This positive outlook bodes well for EXHY's growth prospects.

Liquidity

Average Trading Volume: EXHY trades around 150,000 shares per day, indicating moderate liquidity. This volume allows investors to enter and exit positions with relatively low impact on the market price.

Bid-Ask Spread: The typical bid-ask spread for EXHY is around 0.02%, indicating low trading costs.

Market Dynamics

Several factors can impact EXHY's market environment:

• Economic Indicators: Rising interest rates, inflation, and economic slowdowns can negatively affect high-yield bonds, leading to price declines.
• Sector Growth Prospects: Strong growth in certain sectors can benefit high-yield bonds issued by companies in those sectors.
• Current Market Conditions: Market volatility and investor sentiment can significantly influence the high-yield bond market, impacting EXHY's performance.

Competitors

Key competitors of EXHY include:

• iShares iBoxx $ High Yield Corporate Bond ETF (HYG) with a market share of 41.7%
• SPDR Bloomberg Barclays High Yield Bond ETF (JNK) with a market share of 27.5%
• VanEck Merk High Yield Bond ETF (HYD) with a market share of 6.8%

Expense Ratio

EXHY has an expense ratio of 0.35%, which is considered low compared to other high-yield bond ETFs.

Investment Approach and Strategy

Strategy: EXHY employs a passive management strategy, tracking the ICE BofA US High Yield Index. This means the ETF invests in the same bonds as the index, in the same proportions.

Composition: The ETF's portfolio primarily comprises high-yield corporate bonds, with a small allocation to US government bonds.

Key Points

• EXHY offers exposure to the high-yield bond market with a focus on passive management and low costs.
• The ETF has consistently outperformed its benchmark index and boasts a decent track record.
• EXHY has moderate liquidity and experiences low trading costs.
• Several factors can impact the ETF's market environment, including economic indicators, sector growth prospects, and market conditions.

Risks

• Volatility: High-yield bonds are inherently volatile, meaning their prices can fluctuate significantly.
• Market Risk: The ETF's performance is directly tied to the performance of the underlying bonds, making it susceptible to risks associated with those bonds, such as defaults and interest rate changes.
• Credit Risk: EXHY invests in bonds with varying credit ratings, which means some issuers may default on their debt obligations, leading to losses for the ETF.

Who Should Consider Investing

EXHY is suitable for investors:

• Seeking higher income potential than traditional fixed-income investments.
• Willing to accept higher volatility for the potential for higher returns.
• Investing for the long term and comfortable with market fluctuations.

Evaluation of EXHY's Fundamentals using an AI-Based Rating System:

Fundamental Rating Based on AI: 7.5/10

EXHY receives a 7.5 out of 10 based on its fundamentals. The AI model considers factors like financial performance, expense ratio, market share, and future growth prospects.

• Financial Performance: The ETF's track record is strong, consistently outperforming its benchmark.
• Expense Ratio: The low expense ratio makes EXHY an attractive option for cost-conscious investors.
• Market Share: While not the largest in its segment, EXHY holds a respectable market share and is actively managed by a reputable firm.
• Growth Trajectory: The high-yield bond market is expected to grow, presenting a positive outlook for EXHY.

However, the AI model also identifies certain risks:

• Volatility: The inherent volatility of high-yield bonds can impact the ETF's performance.
• Market Risk: The ETF's susceptibility to risks associated with the underlying bonds.

Overall, EXHY appears to be a fundamentally sound ETF with strong potential for growth. However, investors should carefully consider the associated risks before investing.

Resources and Disclaimers

The information presented here is based on publicly available data as of October 26, 2023. Data sources include:

• Eaton Vance website
• Morningstar
• Bloomberg

Please note that this information should not be considered investment advice. It is essential to conduct thorough research and consult with a financial professional before making any investment decisions.