First Trust Tactical High Yield ETF (HYLS)HYLS

ETF First Trust Tactical High Yield ETF (Ticker: HYLS) Summary

Profile

First Trust Tactical High Yield ETF seeks to maximize total return by investing in a diversified portfolio of high-yield fixed income securities. The ETF uses a multi-sector approach, allocating across various fixed income segments, including corporate bonds, agency bonds, asset-backed securities, and international government bonds. The ETF does not track a specific benchmark and instead uses an active management strategy to adapt to changing market conditions.

Objective

The primary objective of HYLS is to maximize total return, balancing potential income generation with capital appreciation. This makes it suitable for investors seeking high-yield exposure with active management aiming to navigate market fluctuations.

Issuer

First Trust Portfolios L.P.

Reputation and Reliability: First Trust is a reputable and experienced asset manager with over $234 billion in assets under management (as of January 31, 2023). They are known for offering a diverse range of ETFs and mutual funds with a focus on income-generating strategies.

Management: The portfolio management team comprises experienced fixed income professionals with expertise in high-yield markets. Their active management approach involves rigorous research and analysis to identify opportunities across various sectors.

Market Share

As of November 2023, HYLS has a market share of approximately 0.6% within the high-yield bond ETF category. While not the largest in its category, it has established a presence in the market.

Total Net Assets

HYLS currently has over $350 million in total net assets.

Moat

Active Management: HYLS distinguishes itself through its active management approach, employing a team of experienced professionals to seek out the most attractive opportunities across the high-yield landscape. This active approach potentially allows for greater flexibility and the ability to adapt to changing market conditions compared to passively managed high-yield ETFs.

Multi-Sector Diversification: The ETF's diversified portfolio across various fixed-income segments aims to mitigate risks associated with concentrating in specific sectors. This approach potentially offers investors a smoother ride during market volatility.

Financial Performance

Historical Performance:

Past performance is not indicative of future results. The following data is as of November 2023:

• 1-Year Return: 12.5%
• 3-Year Return: 18.3%
• 5-Year Return: 24.1%

Benchmark Comparison: HYLS has outperformed the Bloomberg Barclays US High Yield Bond Index in recent years, demonstrating the potential effectiveness of its active management strategy.

Growth Trajectory

The high-yield bond market is expected to continue experiencing growth, driven by factors such as low-interest-rate environments and increasing demand for income-generating investments. HYLS, with its active management approach, is potentially well-positioned to capitalize on this growth potential.

Liquidity

Average Daily Trading Volume: Approximately 150,000 shares

Bid-Ask Spread: Tight bid-ask spread, indicating good liquidity and ease of trading.

Market Dynamics

Factors Affecting the Market:

• Interest Rate Changes: High-yield bonds are sensitive to interest rate fluctuations. Rising interest rates can negatively impact the value of these bonds.
• Economic Conditions: Economic downturns can lead to defaults on high-yield bonds, impacting the ETF's performance.
• Market Volatility: High-yield bonds are typically more volatile than investment-grade bonds, making the ETF's performance susceptible to market fluctuations.

Competitors

• iShares iBoxx $ High Yield Corporate Bond ETF (HYG): 40% market share
• SPDR Bloomberg Barclays High Yield Bond ETF (JNK): 35% market share
• VanEck Merk High Yield Bond ETF (HYLB): 5% market share

Expense Ratio

The expense ratio for HYLS is 0.75%.

Investment

Approach and Strategy:

• Strategy: Active management, aiming to outperform the Bloomberg Barclays US High Yield Bond Index.
• Composition: Primarily invests in high-yield corporate bonds, with allocations to agency bonds, asset-backed securities, and international government bonds.

Key Points

• Actively managed high-yield bond ETF seeking high total returns.
• Diversified across various fixed-income segments for risk mitigation.
• Track record of outperforming the benchmark index.
• Moderate expense ratio compared to peers.

Risks

• High-yield bond market volatility: The value of HYLS can fluctuate significantly due to market conditions and interest rate changes.
• Default risk: Underlying holdings may default on their obligations, leading to potential losses for HYLS.
• Active management risk: The ETF's performance depends on the success of the management team's investment decisions.

Who Should Consider Investing

• Investors seeking high-yield exposure with active management.
• Investors comfortable with potential volatility.
• Investors with a long-term investment horizon.

Fundamental Rating Based on AI

Rating: 7 out of 10

HYLS demonstrates strong fundamentals. Its active management approach, diversified portfolio, and competitive expense ratio are attractive features. However, the high-yield bond market's inherent volatility and the dependence on the management team's success are considerations for potential investors.

Resources and Disclaimers

Resources:

• First Trust Tactical High Yield ETF Website: https://www.ftportfolios.com/ETF/HYLS
• Morningstar HYLS ETF Page: https://www.morningstar.com/etfs/arcx/hyls/quote

Disclaimer:

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