Virtus ETF Trust Virtus Newfleet Short Duration High Yield Bond ETF (VSHY)

Virtus ETF Trust Virtus Newfleet Short Duration High Yield Bond ETF (NYSEARCA: VHYD)

Profile:

Virtus ETF Trust Virtus Newfleet Short Duration High Yield Bond ETF (VHYD) is a passively managed exchange-traded fund (ETF) that invests in U.S. dollar-denominated, high-yield corporate bonds with a short duration. The ETF seeks to track the Bloomberg U.S. 1-3 Year High Yield Corporate Bond Index, providing investors with exposure to a diversified portfolio of high-yield bonds with maturities of less than three years.

Objective:

The primary objective of VHYD is to provide current income and capital appreciation. The ETF aims to achieve this by investing in a diversified portfolio of short-duration high-yield bonds, which typically offer higher yields than longer-duration bonds.

Issuer:

Virtus ETF Trust is a series of ETFs sponsored by Virtus Investment Partners, a global asset management firm with over $91 billion in assets under management (AUM) as of June 30, 2023. Virtus is a reputable and reliable issuer with a strong track record in the ETF industry.

Management:

The ETF is sub-advised by Newfleet Asset Management, a fixed-income specialist with over $40 billion in AUM. Newfleet has a team of experienced portfolio managers who are responsible for selecting and managing the underlying bonds in the ETF.

Market Share:

VHYD has a relatively small market share in the high-yield bond ETF space, with approximately $160 million in AUM as of August 31, 2023. However, it is one of the few ETFs that focuses exclusively on short-duration high-yield bonds.

Total Net Assets:

As mentioned above, VHYD has approximately $160 million in total net assets.

Moat:

The ETF's competitive advantage lies in its focus on short-duration high-yield bonds. This niche market exposure provides investors with an opportunity to diversify their portfolios and potentially enhance their returns. Additionally, the ETF benefits from the expertise of Newfleet Asset Management, a recognized leader in the fixed-income space.

Financial Performance:

VHYD has delivered a total return of 7.9% since its inception in January 2021. This performance compares favorably to the Bloomberg U.S. Aggregate Bond Index, which returned 1.5% over the same period.

Benchmark Comparison:

VHYD has consistently outperformed its benchmark index, the Bloomberg U.S. 1-3 Year High Yield Corporate Bond Index, over various timeframes. This outperformance demonstrates the effectiveness of the ETF's investment strategy.

Growth Trajectory:

The high-yield bond market is expected to see continued growth in the coming years, driven by factors such as low-interest rates and increasing demand for yield. This trend could benefit VHYD as investors seek exposure to this asset class.

Liquidity:

VHYD has an average trading volume of approximately 20,000 shares per day, indicating reasonable liquidity. The bid-ask spread is typically around 0.05%, which is considered low.

Market Dynamics:

The high-yield bond market is sensitive to economic conditions, interest rate fluctuations, and credit risk. These factors can impact the performance of VHYD.

Competitors:

Key competitors in the high-yield bond ETF space include:

• iShares iBoxx $ High Yield Corporate Bond ETF (HYG) with a market share of 35%
• SPDR Bloomberg Barclays High Yield Bond ETF (JNK) with a market share of 25%
• VanEck Merk High Yield Bond ETF (HYDB) with a market share of 15%

Expense Ratio:

VHYD has an expense ratio of 0.35%, which is relatively low compared to other high-yield bond ETFs.

Investment Approach and Strategy:

The ETF tracks the Bloomberg U.S. 1-3 Year High Yield Corporate Bond Index, which means it passively invests in the bonds included in the index. The ETF holds a diversified portfolio of approximately 300 bonds from various issuers across different industries.

Key Points:

• Focus on short-duration high-yield bonds
• Outperformance relative to benchmark
• Experienced management team
• Low expense ratio

Risks:

• Volatility: High-yield bonds can be more volatile than other types of bonds.
• Market Risk: The ETF is subject to market risks, including interest rate fluctuations and credit risk.
• Liquidity Risk: The ETF's relatively small market share could impact its liquidity.

Who Should Consider Investing:

VHYD is suitable for investors seeking:

• Current income and capital appreciation
• Exposure to high-yield bonds
• Diversification within their fixed-income portfolio

Fundamental Rating Based on AI:

VHYD receives a fundamental rating of 8 out of 10. This rating is based on the ETF's strong financial performance, experienced management team, and focus on a niche market. However, investors should consider the risks associated with high-yield bonds before investing.

Resources and Disclaimers:

• Virtus ETF Trust Virtus Newfleet Short Duration High Yield Bond ETF website: https://www.virtus.com/etfs/vhyd
• Bloomberg Terminal: https://www.bloomberg.com/professional/solution/bloomberg-terminal/
• Yahoo Finance: https://finance.yahoo.com/quote/VHYD/

Disclaimer: The information provided in this analysis should not be considered investment advice. All investment decisions should be made with the help of a qualified financial advisor.