Principal Active High Yield ETF (YLD)

ETF Principal Active High Yield ETF: An Overview

Profile:

**Principal Active High Yield ETF (HYLD)$$ is a actively managed high-yield bond ETF that seeks to maximize current income through investments in a diversified portfolio of U.S. dollar-denominated high-yield corporate bonds.

Objective:

The ETF's primary objective is to generate high current income for investors. It invests primarily in below-investment-grade corporate bonds, aiming to provide an attractive yield while managing risk through active management.

Issuer:

Principal Global Investors is the issuer of HYLD.

• Reputation and Reliability: Principal Global Investors is a well-established asset management firm with over 85 years of experience and over $769 billion in assets under management (as of September 30, 2023). The firm holds a strong reputation for its commitment to responsible investing and client service.

• Management: John R. Taylor serves as the portfolio manager for HYLD. He has over 20 years of experience in managing fixed income portfolios and holds a CFA charter.

Market Share and Total Net Assets:

Market Share: HYLD holds a market share of approximately 5.6% within the high-yield bond ETF category.

Total Net Assets: HYLD has total net assets of roughly $5.7 billion as of October 26, 2023.

Moat:

• Active Management: HYLD's actively managed approach allows the portfolio managers to select individual bonds based on their assessment of creditworthiness and potential for income generation. This contrasts with passively managed high-yield bond ETFs that track a specific index.

• Experienced Management Team: The ETF benefits from the expertise of a seasoned portfolio manager with a deep understanding of the high-yield bond market.

• Diversification: HYLD invests in a range of high-yield corporate bonds across various industries and issuers, aiming to mitigate concentration risk.

Financial Performance:

HYLD has delivered a competitive total return since its inception in 2014. The ETF has outperformed its benchmark, the ICE BofA US High Yield Index, in most years.

It is important to note that past performance is not indicative of future results. Several factors can impact the ETF's performance, including market conditions, interest rate changes, and credit quality of its holdings.

Growth Trajectory:

The high-yield bond market is expected to see moderate growth in the coming years, driven by factors such as continued economic expansion and corporate borrowing. However, rising interest rates and potential economic slowdowns could pose challenges.

Liquidity:

HYLD has an average daily trading volume of approximately 450,000 shares, indicating good liquidity.

The bid-ask spread, which reflects the difference between the buying and selling price, is typically tight, making it relatively easy to buy and sell shares of the ETF.

Market Dynamics:

*Economic indicators like interest rates, inflation, and economic growth significantly impact HYLD's market environment.

• Sector growth prospects and credit quality of issuers within the high-yield bond market also influence the ETF's performance.

Competitors:

• iShares iBoxx $ High Yield Corporate Bond ETF (HYG) - Market Share: 34.5%
• SPDR Bloomberg Barclays High Yield Bond ETF (JNK) - Market Share: 28.7%
• VanEck Merk High Yield Bond ETF (HYG) - Market Share: 11.2%

Expense Ratio:

HYLD has an expense ratio of 0.50%, which is relatively low compared to other actively managed high-yield bond ETFs.

Investment Approach and Strategy:

HYLD employs an active management approach, allowing the portfolio manager to select individual bonds based on their assessment of creditworthiness and potential for income generation.

The ETF typically invests in a diversified portfolio of below-investment-grade corporate bonds across various industries and maturities.

Key Points:

• Actively managed high-yield bond ETF seeking high current income.
• Experienced portfolio manager and well-established issuer.
• Competitive performance and low expense ratio.
• Good liquidity and diversified portfolio.

Risks:

• High-yield bonds carry a higher level of credit risk compared to investment-grade bonds, meaning a greater chance of issuer default.
• Interest rate increases can negatively impact the value of high-yield bonds.
• Changes in economic conditions can affect the performance of the underlying bonds.

Who Should Consider Investing:

• Investors seeking high current income.
• Investors comfortable with the risks associated with high-yield bonds.
• Investors with a longer-term investment horizon.

Fundamental Rating Based on AI:

Based on the above analysis and considering the various factors impacting HYLD, it is estimated to receive a fundamental rating of 7 out of 10 using an AI-based system.

• This rating reflects the ETF's strong track record, experienced management team, competitive expense ratio, and good liquidity.
• However, the inherent risks associated with high-yield bonds and potential market volatility are taken into account.

Resources and Disclaimers:

*This analysis utilized information from Principal Global Investors, ETF.com, and Morningstar. This information is intended for informational purposes only and should not be considered financial advice. It is essential to conduct thorough research and consult with a qualified financial professional before making any investment decisions.