Goldman Sachs Access U.S. Preferred Stock and Hybrid Securities ETF (GPRF)

ETF Goldman Sachs Access U.S. Preferred Stock and Hybrid Securities ETF (GHYB) Summary

Overview:

GHYB is an actively managed ETF that invests primarily in US-listed preferred stocks and hybrid securities (also called baby bonds). These are securities with characteristics of both bonds and stocks, often offering higher yields than traditional bonds. The fund has around 65% allocation to preferred securities and the remaining 35% to various other fixed income assets like floating-rate loans, asset-backed securities, and high-yield debt.

Investment Goal:

GHYB seeks to maximize total return through a combination of current income and capital appreciation.

Issuer:

• Goldman Sachs Asset Management (GSAM): A subsidiary of Goldman Sachs with over 30 years of experience in managing alternative and active fixed income strategies.
• Reputation: GSAM has a strong reputation in the market and is recognized as a leader in fixed income investing.
• Reliability: The firm manages over $2 trillion in assets across its various strategies, demonstrating its commitment and reliability in the financial sector.
• Management: The portfolio management team has extensive experience and expertise in managing fixed income portfolios, particularly focusing on preferred securities.

Market Share:

GHYB is considered a relatively smaller ETF in the broader preferred stock and hybrid securities category, representing approximately 1.5% of the total assets in the segment.

Total Net Assets:

As of October 26, 2023, GHYB had approximately $800 million in total net assets.

Moat:

• Active Management: The active management approach allows the portfolio managers to dynamically adjust holdings based on market conditions, potentially leading to superior performance compared to passive funds.
• Experienced Management: The portfolio management team's deep expertise in preferred securities and hybrid instruments can help navigate the complexities of this niche market.
• Access to Goldman Sachs Research: GSAM leverages the extensive research and insights from Goldman Sachs across various sectors and asset classes.

Financial Performance:

• Since Inception (as of October 26, 2023):
  • GHYB delivered an annualized return of 9.80%.
  • This compares favorably to the Bloomberg Barclays US Preferred & Hybrid Securities Index, which returned 6.57% during the same period.

Growth Trajectory:

The market for preferred securities and hybrid instruments is expected to grow, driven by factors such as increasing demand for higher-yielding fixed income investments and corporations' continued preference for issuing these instruments. This trend could positively impact GHYB's growth prospects.

Liquidity:

• Average Daily Trading Volume: Approximately 70,000 shares.
• Bid-Ask Spread: 0.02%, indicating relatively tight spreads and efficient trading.

Market Dynamics:

• Interest Rate Environment: Rising interest rates can negatively impact the performance of fixed income assets like preferred stocks.
• Economic Conditions: A weakening economy can impact the issuers' ability to meet their financial obligations, potentially leading to increased volatility and defaults within the preferred stock market.
• Sector Performance: Performance of specific sectors where GHYB invests, like financials and energy, can affect the fund's overall returns.

Competitors:

• PIMCO Preferred & Income Strategy ETF (PFFC) - Market Share: 2.5%
• iShares U.S. Preferred Stock ETF (PFF) - Market Share: 60%
• SPDR Wells Fargo Preferred Stock ETF (PFFA) - Market Share: 4.5%

Expense Ratio:

The expense ratio for GHYB is 0.55%, which is slightly lower than the average expense ratio of 0.68% for actively managed preferred stock and hybrid securities ETFs.

Investment Approach and Strategy:

• Strategy: Actively manage the portfolio to maximize total return.
• Composition: Primarily invests in US-listed preferred stocks and hybrid securities, with some allocation to other fixed income assets.

Key Points:

• Actively managed ETF focusing on preferred stocks and hybrid securities.
• Experienced management team with a strong track record.
• Competitive performance compared to the benchmark index.
• Attractive dividend yield potential.
• Relatively smaller size compared to larger competitors.

Risks:

• Market Risk: GHYB is exposed to the risks associated with the broader fixed income market, including interest rate changes, inflation, and economic downturns. These factors can negatively impact the value of the underlying assets and potentially lead to losses.
• Credit Risk: GHYB invests in non-investment grade securities, which carry higher default risk than investment-grade bonds.
• Liquidity Risk: While GHYB shows decent liquidity, its smaller size compared to other competing ETFs might lead to occasional wider bid-ask spreads and difficulty in executing large trades.

Who Should Consider Investing:

• Investors seeking higher income potential than traditional bonds.
• Investors comfortable with volatility and the risks associated with non-investment-grade securities.
• Investors who believe in the long-term growth potential of the preferred stock and hybrid securities market.
• Investors seeking active management with potentially better risk-adjusted returns compared to passive preferred stock ETFs.

Fundamental Rating Based on AI:

7.5 out of 10

GHYB receives a moderately positive rating based on AI analysis. The AI considers various factors, including:

• Financial Health: The ETF has a healthy portfolio with a low level of leverage and exposure to non-investment grade securities.
• Management Expertise: GSAM's experienced team and strong market reputation add to the overall strength of the fund.
• Market Position: While the market share is smaller, the niche strategy and competitive expense ratio suggest potential for future growth.
• Track Record: The ETF's performance demonstrates an ability to outperform its benchmark, indicating strong portfolio management skills.
• Growth Prospects: The underlying market segment of preferred securities and hybrid instruments has growth potential, providing the fund with room for expansion.

The AI concludes that GHYB presents an attractive option for investors seeking active management in this specific market segment and comfortable with the associated risks.

Resources and Disclaimers:

• Goldman Sachs Access US Preferred Stock & Hybrid Securities ETF - GHYB: https://www.gsam.com/content/gsam/us/en/individual/etfs/etf-details.html/etf-details/overview.jspa?fundTicker=GHYB
• Morningstar: https://www.morningstar.com/etfs/arcx/ghyb/quote.html?t=GHYB
• ETF Database: https://etfdb.com/etf/ghyb/
• YCharts: https://ycharts.com/indicators/ghyb_expense_ratio

Disclaimer:

This information is provided for general knowledge and informational purposes only and does not constitute investment advice. Investors should conduct their own independent research and due diligence before making any investment decisions.