SPDR BOFA MERRILL LYNCH CROSSOVER CORPORATE BOND ETF SPDR BOFA MERRILL LYNCH CROSSOVER CORPORATE BOND ETF (XOVR)

ETF Summary: SPDR® Bloomberg Barclays® High Yield Bond ETF (HYG)

Profile:

The SPDR® Bloomberg Barclays® High Yield Bond ETF (HYG) is a passively managed exchange-traded fund that seeks to track the performance of the Bloomberg Barclays US Corporate High Yield Bond Index. This index comprises US dollar-denominated, high-yield, fixed-rate, non-convertible corporate bonds publicly issued in the US domestic market. HYG offers investors exposure to the high-yield corporate bond market, aiming to provide a high level of current income.

Objective:

HYG's primary objective is to provide investment results that, before expenses, generally correspond to the price and yield performance of the Bloomberg Barclays US Corporate High Yield Bond Index. This translates to generating income through interest payments and capital appreciation through price increases.

Issuer:

State Street Global Advisors (SSGA)

• Reputation and Reliability: SSGA is a leading asset management firm with a long history and a strong reputation for reliability. Founded in 1978, it manages over $3.6 trillion in assets as of March 31, 2023.
• Management: The ETF is managed by a team of experienced portfolio managers and analysts with expertise in fixed income markets.

Market Share:

HYG is the largest high-yield bond ETF in the market, with a market share of approximately 40%.

Total Net Assets:

As of October 26, 2023, HYG has over $46.5 billion in total net assets.

Moat:

• Size and Liquidity: HYG's large size and high trading volume ensure high liquidity, making it easy for investors to buy and sell shares.
• Low Expense Ratio: With an expense ratio of 0.40%, HYG is one of the most cost-effective ways to access the high-yield bond market.
• Diversification: The ETF holds a diversified portfolio of over 1,200 bonds, which helps to mitigate issuer-specific risk.

Financial Performance:

• Average Annual Return: Since its inception in 2007, HYG has generated an average annual return of 5.94%.
• Benchmark Comparison: HYG has historically outperformed its benchmark, the Bloomberg Barclays US Corporate High Yield Bond Index, by a small margin.

Please note: Past performance is not indicative of future results.

Growth Trajectory:

The high-yield bond market is expected to continue to grow in the coming years due to increasing demand for yield in a low-interest-rate environment. This bodes well for HYG's future growth prospects.

Liquidity:

• Average Daily Trading Volume: Over 20 million shares
• Bid-Ask Spread: Typically less than 0.01%

Market Dynamics:

• Interest Rate Risk: High-yield bonds are more sensitive to interest rate changes than other types of bonds. Rising interest rates can lead to a decrease in the value of HYG.
• Economic Conditions: The performance of high-yield bonds is influenced by the overall economic outlook. Recessions or economic slowdowns can lead to increased defaults and decreased demand for high-yield bonds.

Competitors:

• iShares iBoxx $ High Yield Corporate Bond ETF (HYG) - 40% market share
• Vanguard High-Yield Corporate Bond ETF (VHY) - 15% market share
• SPDR Nuveen Bloomberg Barclays Short Term High Yield Bond ETF (SJNK) - 10% market share

Expense Ratio:

HYG has an expense ratio of 0.40%.

Investment Approach and Strategy:

• Strategy: HYG tracks the Bloomberg Barclays US Corporate High Yield Bond Index.
• Composition: The ETF holds a diversified portfolio of over 1,200 bonds issued by various companies across various industries.

Key Points:

• Large and liquid ETF providing exposure to the high-yield bond market.
• Seeks to track the performance of the Bloomberg Barclays US Corporate High Yield Bond Index.
• Offers a high level of current income and potential for capital appreciation.
• Low expense ratio compared to other high-yield bond ETFs.

Risks:

• Interest Rate Risk: The value of HYG may decline if interest rates rise.
• Credit Risk: The bonds held by HYG are subject to credit risk, meaning the issuer may default on its debt obligations.
• Market Risk: The value of HYG may decline due to overall market conditions.

Who Should Consider Investing:

• Investors seeking high income and potential for capital appreciation.
• Investors with a moderate to high-risk tolerance.
• Investors seeking diversification within their fixed-income portfolio.

Fundamental Rating Based on AI: 7/10

HYG receives a 7 out of 10 rating based on its strong track record, large size, and liquidity. However, the ETF is exposed to interest rate and credit risks, which investors should consider.

Resources and Disclaimers:

• https://www.spdrproducts.com/etf/us/en/insights/market-commentary/high-yield-corporate-bonds-resilience-amid-volatility/
• https://www.ssga.com/library-content/products/fund-fact-sheets/us/etfs/hyg-us.pdf
• https://www.ishares.com/us/products/etf-product-overview/284573071

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.