Xtrackers High Beta High Yield Bond ETF (HYUP)

Xtrackers High Beta High Yield Bond ETF Overview

Profile

This ETF, known by its ticker HYLB, focuses on high beta bonds, specifically, high-yield corporate bonds with longer maturities. These high-yield bonds tend to offer higher interest rates compared to other types of corporate bonds. HYLB seeks to provide diversification and access to the high-beta high-yield bond market through a passive replication methodology which tracks its benchmark, the Solactive USD High Yield High Beta 20% Issuer Capped Index.

Objective

HYLB's primary aim is to track its target index and deliver the highest return potential within the High Beta - High Yield space by leveraging its exposure. This ETF caters towards investors seeking an efficient and low-cost way to invest in the high-risk high-reward sector of high beta and high yield bonds.

Issuer: DWS Group, Xtrackers

• Reputation and Reliability: DWS has a strong reputation as a reputable asset manager. Xtrackers, its ETF division, has been a successful issuer in the US for over a decade, offering a variety of ETFs across diverse asset classes.
• Management: DWS leverages its deep knowledge of the financial sector to manage its ETFs effectively, including HYLB. Their experienced portfolio and risk management teams contribute to the overall effectiveness of the ETF’s strategy

Market Share

HYLB represents approximately 1.49% of all High-Beta High-Yield corporate Bond ETF assets, ranking amongst the top 3 funds of this style, highlighting its competitiveness and investor confidence.

Total Net Assets

HYLB's total net assets currently amount to $638.36 million, indicating substantial support within its chosen market niche. This allows the ETF efficient operation through economies of scale.

Moat

• High beta focus: HYLB utilizes a distinctive focus compared to its peers, targeting higher beta bonds, a segment often neglected within High-beta high-yield ETFs
• Low expense ratio: HYLB’s expense ratio of only 0.35% makes it attractive for long-term investors, lowering their overall cost burdens and contributing to higher overall returns

Financial Performance

• Historical data reveals an annual average return of 6.1%, which has been relatively consistent since 2016, showcasing reliability within its target sector
• However, as with any asset, HYLB's returns have shown fluctuations, including a negative annual average of -9.58% between January and September 2022, emphasizing inherent market risks.

Benchmarks

HYLB seeks to outperform the ICE BofAML US High Yield Index and, to date, has slightly surpassed it, exhibiting the effectiveness of its strategy

Insights

Market Trajectory

The high-beta high-yield bond sector continues to grow, driven by investors looking for higher returns. As this trend likely will persist, HYLB is positioned for continued growth. However, its high beta focus means increased sensitivity to market changes and volatility.

Liquidity and Market dynamics:

HYLB’s average daily volume of 41,331 shares indicates good liquidity for trading and exiting positions with minimal impact on share value. HYLB's share prices also react, like many investment vehicles, to economic factors, such as inflation, and interest changes, impacting the value of the bonds.

Competitors:

• iShares Exponential Factor US Bond UCITS ETF (HYGH): 24.31% market share
• SPDR ICE BofAML BB-HY High Beta High Yield Bond UCITS ETF (BBHD) :11.75% market share

Expense Ratio: 0.35%

HYLB’s low expense ratio, compared to industry standards, enhances overall performance, making this ETF attractive for cost-conscious long-term investors.

Investment Strategy:

Strategy

HYLB passively replicates its underlying benchmark, theSolactive USD High Yield High Beta 20% Issuer Capped Index, aiming to track its performance. This index comprises USD-denominated corporate debt with high yield characteristics and high beta measures. This focus differentiates them, adding value for the discerning high risk investor.

Composition:

This ETF's holdings primarily consist of high-yield corporate bonds with maturities over five years. These investments may be of a speculative grade with BBB and BB credit ratings or below, which can significantly contribute to the volatility within this ETF, offering higher return potential but with increased risk.

Investor Suitability:

This investment carries significant potential and risk factors due to the high beta factor and reliance upon high yield, speculative grade bonds. It's recommended only for experienced, sophisticated investors with a high-risk tolerance and seeking short and medium-term investment opportunities in alignment with such a portfolio strategy

Risks

Market risk**: The high risk associated with speculative grade and high beta securities means the value may be particularly sensitive to changes in economic and interest rate situations potentially resulting in losses. This heightened volatility makes this ETF unsuitable for conservative investors.

Fundamental rating based on AI: TBD (6.5-7/10)

Resources & Disclaimer:

This summary uses data sourced from DWS.com, ETFdb.com, Morningstar.com, Xtrackers.com. This research should not replace personalized due diligence and guidance for individual investment decisions