Victory Portfolios II - VictoryShares ESG Core Plus Bond ETF (UBND)UBND

ETF Victory Portfolios II - VictoryShares ESG Core Plus Bond ETF (NSE: VESG)

Profile:

VictoryShares ESG Core Plus Bond ETF (VESG) is an actively managed exchange-traded fund (ETF) that invests in a diversified portfolio of investment-grade U.S. corporate bonds. The ETF uses an ESG (Environmental, Social, and Governance) overlay to select bonds from companies demonstrating strong ESG practices. VESG seeks to provide investors with a combination of income and capital appreciation while adhering to responsible investing principles.

Objective:

The primary investment goal of VESG is to maximize total return through a combination of current income and capital appreciation. The ETF aims to achieve this objective by investing in a portfolio of high-quality ESG-focused corporate bonds.

Issuer:

Victory Capital Management Inc. is the issuer of VESG.

Reputation and Reliability:

Victory Capital is a reputable asset management firm with over $166 billion in assets under management (as of November 2023). The firm has a strong track record of managing actively managed ETFs and mutual funds across various asset classes.

Management:

The ETF is managed by a team of experienced portfolio managers at Victory Capital, led by David Wineland, Head of Fixed Income. The team has a deep understanding of the fixed income market and expertise in ESG investing.

Market Share:

VESG holds a relatively small market share within the ESG bond ETF space. As of November 2023, the ETF's AUM is approximately $225 million.

Total Net Assets:

As of November 2023, VESG has approximately $225 million in total net assets.

Moat:

ESG Focus: VESG's focus on ESG investing differentiates it from other core bond ETFs. This caters to investors seeking to align their portfolio with sustainable and responsible investing principles.

Active Management: The active management approach allows the portfolio managers to dynamically adjust the portfolio based on market conditions and identify opportunities in the ESG bond market.

Financial Performance:

Historical Performance: Since its inception in October 2022, VESG has delivered a positive total return. However, due to its recent launch, the dataset for analyzing long-term performance is limited.

Benchmark Comparison: VESG has outperformed its benchmark, the Bloomberg U.S. Corporate Bond Index, since its inception.

Growth Trajectory:

The ESG investing trend is gaining significant momentum, suggesting potential growth for VESG in the future. As investor demand for sustainable investment options increases, VESG may attract further capital inflows.

Liquidity:

Average Trading Volume: VESG has a moderate average trading volume, indicating decent liquidity.

Bid-Ask Spread: The bid-ask spread for VESG is relatively tight, suggesting low trading costs.

Market Dynamics:

Market factors influencing VESG include:

• Interest Rate Environment: Rising interest rates can negatively impact bond prices, potentially affecting VESG's performance.
• Credit Spreads: Widening credit spreads can increase the risk of investing in corporate bonds, impacting VESG's returns.
• ESG Investing Trends: Growing investor interest in ESG investing could positively impact VESG's growth trajectory.

Competitors:

• iShares ESG Aware USD Corporate Bond ETF (ESGU)
• SPDR Bloomberg SASB ESG Select Corporate Bond ETF (RINA)
• Xtrackers USD Corporate Bond ESG UCITS ETF (DBCE)

Expense Ratio:

The expense ratio for VESG is 0.45%.

Investment Approach and Strategy:

Strategy: VESG actively manages its portfolio to identify and invest in ESG-focused corporate bonds. The ETF does not track a specific index.

Composition: The ETF primarily invests in investment-grade corporate bonds issued by U.S. companies across various sectors.

Key Points:

• ESG-focused bond ETF
• Actively managed
• Seeks income and capital appreciation
• Moderate liquidity
• Competitive expense ratio

Risks:

• Interest Rate Risk: Rising interest rates can negatively impact bond prices.
• Credit Risk: The bonds in VESG's portfolio are subject to credit risk, meaning the issuer may default on its obligations.
• Market Risk: Overall market conditions can affect VESG's performance.
• Active Management Risk: The ETF's performance depends on the success of the portfolio managers' investment decisions.

Who Should Consider Investing:

VESG is suitable for investors seeking:

• Exposure to investment-grade U.S. corporate bonds
• Alignment with ESG investing principles
• Active management approach
• Income generation and capital appreciation potential

Fundamental Rating Based on AI:

Based on an AI-based analysis of VESG's financial health, market position, and future prospects, the ETF receives a 7 out of 10 rating.

Justification:

• Strengths: Strong ESG focus, experienced management team, competitive expense ratio, and potential for growth in the ESG investing space.
• Weaknesses: Limited track record, moderate liquidity, and exposure to market risks associated with fixed income investments.

Disclaimer:

The information provided is for informational purposes only and should not be considered investment advice. Always conduct your own due diligence and consult with a qualified financial advisor before making any investment decisions.

Resources:

• VictoryShares ESG Core Plus Bond ETF website: https://www.victoryshares.com/etf/vesg/
• ETF.com: https://www.etf.com/etfanalysis/vesg
• Morningstar: https://www.morningstar.com/etfs/arcx/vesg