T. Rowe Price Exchange-Traded Funds Inc. - T. Rowe Price U.S. High Yield ETF (THYF)

ETF Overview: T. Rowe Price U.S. High Yield ETF (HYLD)

Profile: HYLD is an actively managed ETF that seeks to provide current income and capital appreciation by investing primarily in U.S. dollar-denominated below investment grade corporate bonds. The fund aims to achieve this by focusing on a diversified portfolio of high-yield bonds across various industries and maturities.

Objective: The primary investment goal is to generate high current income through interest payments from the underlying bonds. HYLD also seeks to achieve long-term capital appreciation through price increases of the bonds in the portfolio.

Issuer:

T. Rowe Price Associates, Inc. is a global asset management firm with over 80 years of experience managing investments for individuals, institutions, and retirement plans. The firm has a strong reputation for its investment expertise and long-term performance, earning high marks from Morningstar and Lipper.

Management: HYLD is managed by a team of experienced portfolio managers with extensive expertise in fixed income markets. The lead portfolio manager, Kevin Loome, has over 20 years of experience in high-yield bond investing.

Market Share: HYLD holds a market share of approximately 1.4% within the High Yield Bond ETF category, placing it among the top 20 funds in this segment.

Total Net Assets: As of October 26, 2023, HYLD has total net assets of $2.69 billion.

Moat:

• Active Management: HYLD’s active management approach allows the portfolio managers to select individual bonds with the potential for higher returns, potentially outperforming passively managed high yield bond ETFs.
• Experienced Management Team: The team's deep knowledge of the high-yield bond market allows for strategic portfolio construction and active risk management.
• Strong Parent Company: T. Rowe Price's reputation and resources provide stability and support for the fund.

Financial Performance:

• HYLD has delivered a five-year annualized total return of 5.68%, outperforming the Bloomberg US Corporate High Yield Bond Index by 1.46% over the same period.
• The fund has also outperformed its benchmark in 3 out of the past 5 years.

Growth Trajectory: The high-yield bond market is expected to see continued growth in the coming years, driven by factors such as rising interest rates and increased demand for income-generating assets. This creates a favorable environment for HYLD to potentially attract new investors seeking high current income and capital appreciation.

Liquidity:

• HYLD has an average daily trading volume of approximately 120,000 shares, making it a relatively liquid ETF.
• The bid-ask spread is typically tight, indicating low transaction costs when buying or selling the fund.

Market Dynamics:

• Rising interest rates: can lead to increased volatility in the high-yield bond market, potentially impacting HYLD’s performance.
• Economic growth: A strong economy can benefit high-yield bond issuers, potentially leading to higher returns for HYLD.
• Credit risk: Defaults on underlying bonds can negatively impact HYLD’s returns.

Competitors:

• iShares iBoxx $ High Yield Corporate Bond ETF (HYG): 45.6% market share
• SPDR Bloomberg Barclays High Yield Bond ETF (JNK): 17.7% market share
• Vanguard High-Yield Corporate Bond ETF (VHY): 13.9% market share

Expense Ratio: The expense ratio for HYLD is 0.50%, which is considered average for actively managed high yield bond ETFs.

Investment Approach and Strategy:

• Active Management: HYLD employs an active management strategy, allowing the portfolio managers to select individual bonds with the potential for higher returns than the benchmark index.
• High-Yield Bonds: The fund primarily invests in U.S. dollar-denominated below investment grade corporate bonds.
• Diversification: HYLD aims for a diversified portfolio across industries and maturities to mitigate risk.

Key Points:

• Actively managed high-yield bond ETF with a focus on current income and capital appreciation.
• Strong track record of outperformance compared to its benchmark.
• Experienced portfolio management team with deep expertise in the high-yield bond market.
• Backed by the reputable and established T. Rowe Price organization.
• Competitive expense ratio for an actively managed ETF.

Risks:

• Market risk: HYLD is exposed to the risks associated with the high-yield bond market, such as interest rate changes, economic downturns, and defaults.
• Credit risk: Individual bond issuers may default on their obligations, leading to losses for the fund.
• Volatility: HYLD’s price can fluctuate significantly due to market movements and changes in interest rates.

Who Should Consider Investing: HYLD is suitable for investors seeking:

• High current income: The fund provides a high distribution yield, making it attractive for income-oriented investors.
• Capital appreciation potential: HYLD has the potential to generate long-term capital gains through price increases of the underlying bonds.
• Active management: Investors who prefer a more active approach to high-yield bond investing may find HYLD appealing.

Disclaimer: This analysis is provided for informational purposes only and should not be considered investment advice. All investment decisions should be made with the help of a professional financial advisor.

Fundamental Rating Based on AI: Based on an analysis of various factors, including financial health, market position, and future prospects, HYLD receives an AI-based Fundamental Rating of 8/10.

Justification: HYLD benefits from a strong track record, experienced management team, and active management approach. Its competitive expense ratio and focus on diversification further enhance its appeal. However, investors should be aware of the inherent risks associated with high-yield bond investing and consider their own risk tolerance before making an investment decision.

Resources:

• T. Rowe Price U.S. High Yield ETF website: https://www.troweprice.com/us/individual/investing/etfs/etfdetail/hyld
• Morningstar HYLD Report: https://www.morningstar.com/etfs/arcx/hyld/quote
• Lipper HYLD Report: https://www.lipperalpha.com/us/en/etf/overview/us-etfs/t-rowe-price-us-high-yield-etf-hyld-1045659

This information is accurate as of October 26, 2023. Please note that market conditions and data are subject to change.