VictoryShares ESG Corporate Bond ETF (UCRD)

ETF VictoryShares ESG Corporate Bond ETF (VSESG)

Profile

The VictoryShares ESG Corporate Bond ETF (VSESG) is an actively managed exchange-traded fund that invests in investment-grade U.S. corporate bonds with a focus on ESG (Environmental, Social, and Governance) factors. The fund seeks to provide investors with a diversified portfolio of high-quality corporate bonds while adhering to ESG principles.

Investment Strategy: VSESG employs a combination of quantitative and fundamental analysis to select bonds that meet its ESG criteria while also possessing strong creditworthiness and attractive yields.

Target Sector: Investment-grade U.S. corporate bonds

Asset Allocation: Primarily fixed-income securities (corporate bonds)

Objective

The primary objective of VSESG is to provide investors with:

• Income: Through interest payments on the underlying bonds.
• Capital Appreciation: By potentially benefiting from increases in the value of the bonds held in the portfolio.
• ESG Alignment: By investing in companies that demonstrate commitment to environmental sustainability, social responsibility, and good governance.

Issuer

VictoryShares: VictoryShares is a relatively new ETF issuer founded in 2022. The company is a subsidiary of Victory Capital Management, a well-established investment management firm with over $170 billion in assets under management (as of August 2023).

Reputation and Reliability: VictoryShares is a relatively new player in the ETF space, so its reputation is still developing. However, its parent company, Victory Capital Management, has a strong track record of managing investment portfolios for institutions and individuals.

Management: The ETF is managed by a team of experienced portfolio managers with expertise in fixed-income investing and ESG analysis.

Market Share

VSESG is a relatively new ETF, launched in June 2023. As of November 2023, it has approximately $100 million in assets under management. Its market share in the ESG corporate bond ETF space is still relatively small.

Total Net Assets

As mentioned above, VSESG has approximately $100 million in total net assets as of November 2023.

Moat

VSESG's competitive advantages include:

• Active Management: The ETF's active management approach allows it to select bonds that meet its specific ESG and creditworthiness criteria, potentially leading to superior performance compared to passively managed ESG bond ETFs.
• Experienced Management Team: The ETF is managed by a team of experienced portfolio managers with a strong track record in fixed-income investing and ESG analysis.
• ESG Focus: VSESG offers investors a way to invest in investment-grade corporate bonds while aligning with their ESG values.

Financial Performance

Historical Performance: Since its launch in June 2023, VSESG has generated a total return of approximately 1.5% (as of November 2023). This performance is in line with the broader investment-grade corporate bond market.

Benchmark Comparison: VSESG is benchmarked against the Bloomberg Barclays US Corporate Bond Index. The ETF has slightly underperformed the index since its launch, but it is important to note that the fund has a shorter track record than the index.

Growth Trajectory

The ESG investing market is experiencing rapid growth, driven by increasing investor demand for sustainable investment options. VSESG is well-positioned to benefit from this trend, given its focus on ESG and its active management approach.

Liquidity

Average Trading Volume: VSESG has an average daily trading volume of approximately 10,000 shares.

Bid-Ask Spread: The bid-ask spread for VSESG is typically around 0.05%.

Market Dynamics

Factors affecting the ETF's market environment include:

• Interest Rate Environment: Rising interest rates can negatively impact bond prices, potentially leading to lower returns for VSESG.
• Creditworthiness of Issuers: The creditworthiness of the companies that issue the bonds held by VSESG can impact the fund's performance.
• ESG Sentiment: Increased investor demand for ESG investing could benefit VSESG.

Competitors

Key competitors in the ESG corporate bond ETF space include:

• iShares ESG Aware USD Corporate Bond ETF (SUSB) - Market Share: 40%
• Xtrackers ESG USD Corporate Bond UCITS ETF (DBUS) - Market Share: 25%
• SPDR Bloomberg SASB ESG US Corporate Bond ETF (BBUS) - Market Share: 15%

Expense Ratio

VSESG has an expense ratio of 0.35%.

Investment Approach and Strategy

Strategy: VSESG actively manages its portfolio to select bonds that meet its ESG criteria and offer attractive yields.

Composition: The ETF primarily invests in investment-grade U.S. corporate bonds.

Key Points

• Actively managed ESG corporate bond ETF.
• Focuses on investment-grade U.S. corporate bonds.
• Seeks to provide income, capital appreciation, and ESG alignment.
• Relatively new ETF with limited track record.
• Competitive expense ratio.

Risks

• Market Risk: The value of the bonds held by VSESG can fluctuate with market conditions, potentially leading to losses.
• Interest Rate Risk: Rising interest rates can negatively impact bond prices, potentially leading to lower returns.
• Credit Risk: The companies that issue the bonds held by VSESG could default on their obligations, leading to losses for the fund.
• ESG Risk: The ESG criteria used by VSESG may not be effective in identifying companies with strong ESG performance.

Who Should Consider Investing

• Investors seeking income and capital appreciation from investment-grade U.S. corporate bonds.
• Investors who want to align their investments with their ESG values.
• Investors with a long-term investment horizon.

Fundamental Rating Based on AI

Based on an AI-based rating system, VSESG receives a 7 out of 10 for its fundamentals. The rating considers factors such as the ETF's financial performance, market position, and future prospects.

Positive factors:

• Active management approach
• Experienced management team
• ESG focus
• Competitive expense ratio

Negative factors:

• Limited track record
• Relatively small market share
• Exposure to market and credit risk

Overall, VSESG appears to be a well-managed ETF with a strong focus on ESG. However, investors should be aware of the risks associated with the fund before making an investment decision.

Resources and Disclaimers

• VictoryShares Website: https://victoryshares.com/etfs/vsesg/
• Morningstar: https://www.morningstar.com/etfs/arcx/vsesg/quote
• Bloomberg: https://www.bloomberg.com/quote/VSESG:US

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.