A smart beta exchange traded fund, the Northern Trust High Yield Value-Scored Bond ETF (HYGV) debuted on 07/17/2018, and offers broad exposure to the High-Yield/Junk Bond ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $1.07 billion, this makes it one of the larger ETFs in the High-Yield/Junk Bond ETFs. HYGV is managed by Northern Trust Etfs. This particular fund seeks to match the performance of the NORTHERN TRUST HY VLU-SCRD US CORP BD ID before fees and expenses.
The Northern Trust High Yield Value-Scored US Corporate Bond Index measures the performance of a diversified universe of high yield, US-dollar denominated bonds of companies exhibiting favorable fundamental qualities, market valuations and liquidity.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.37% for HYGV, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 7.41%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Cash (USD_CASH) accounts for about 4.18% of the fund's total assets, followed by Tenneco Inc Callable Notes Fixed 8% 17/nov/2028 (880349AU9) and Mpt Operating Partnership Lp / Mpt Finance Corp-5.00%-10-15-2027 (55342UAH7).
The top 10 holdings account for about 11.34% of total assets under management.
Performance and Risk
The ETF has gained about 2.78% so far this year and is up about 5.03% in the last one year (as of 09/04/2026). In the past 52-week period, it has traded between $39.62 and $41.28
The ETF has a beta of 0.41 and standard deviation of 5.09% for the trailing three-year period. With about 999 holdings, it effectively diversifies company-specific risk .
Alternatives
Northern Trust High Yield Value-Scored Bond ETF is a reasonable option for investors seeking to outperform the High-Yield/Junk Bond ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
iShares iBoxx $ High Yield Corporate Bond ETF (HYG) tracks Markit iBoxx USD Liquid High Yield Index and the iShares Broad USD High Yield Corporate Bond ETF (USHY) tracks BofA Merrill Lynch U.S. High Yield Constrained Index. iShares iBoxx $ High Yield Corporate Bond ETF has $15.74 billion in assets, iShares Broad USD High Yield Corporate Bond ETF has $28.5 billion. HYG has an expense ratio of 0.49% and USHY changes 0.08%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the High-Yield/Junk Bond ETFs
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Northern Trust High Yield Value-Scored Bond ETF (HYGV): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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