The investment objective of the High Yield ETF (NYSE Arca: HYLD) is to generate a high current income with a secondary goal of capital appreciation. HYLD is sub-advised by Phase Capital. HYLD seeks to achieve the Fund’s objective by selecting a focused portfolio largely of high yield corporate debt securities that, via their coupons, generate a tangible income stream. HYLD takes a value-based approach to credit selection, focusing on smaller issuers where there is less competition, that offer the opportunity for generous risk-adjusted yields. In addition and equally important, Phase Capital takes an pro-active approach to managing risk. Our investment team’s 360-degree risk management process looks beyond fundamentals to get a complete picture of the risks that may impact the portfolio, taking into account macroeconomic and business cycle factors, credit and interest rate risk, as well as issuer specific risk. This is combination of research-based issuer selection with active risk management is what differentiates HYLD from its peers.
|Primary Exchange||NYSE Arca|
|Number of Holdings||26924|
|Fund Inception Date||11/30/2010|
|JP MORGAN USD GOVT MONEY MARKET INSTL||2.57|
|OSUM PRODUCTION 07/31/20 TERM LOAN||2.18|
|TECHNIPLAS LLC 10 5/1/2020||2.12|
|COMPASS GROUP DIVERSIFIE 8 5/1/2026||2.01|
|LEE ENTERPRISES INC 9.5 3/15/2022||1.97|
Holdings are subject to change.
HYLD places limited value on the rating agencies and their backward looking methodologies, yet it seems many fixed income investors continue to use ratings as one of their primary investment tools. Additionally, many funds are subject to arbitrary restrictions, such as tranche size constraints, that can limit their investment universe. HYLD believe that these arbitrary restrictions can hinder investment performance.
HYLD has an active management strategy, concentrating on the securities they feel offer the best value relative to risk within the company’s capital structure. With this strategy, HYLD can address the deficiencies of many of the high yield indexes and index-based products, which don’t focus on credit analysis to determine the viability of a credit or industry or sell over-valued names. With this active strategy, they can work to avoid industries and securities they believe may face trouble going forward and position themselves for a given macroeconomic environment and outlook.
HYLD’ investment ideas, themes, and research are generated internally, allowing them to search for value and avoid popular trends. Through their fundamental credit and valuation analysis, HYLD pays particular attention to businesses they see as providing an “essential” product or service, having the ability to generate free cash flow, having a manageable capital structure and/or having hard asset values that are not being reflected in the bond pricing.
HYLD primarily focuses on the “secondary” market, often investing in assets at a discount to par ($100), allowing for a potential opportunity to generate capital gains in addition to current yield.
The HYLD team lets the value they see in the market dictate the portfolio’s diversification, rather than accepting securities that are viewed as less desirable for the sake of diversification. While still broadly diversified across various industries and securities, HYLD’s portfolio is expected to be more focused and concentrated than many of the larger funds.
HYLD seeks a portfolio generating a high current income largely provided by corporate debt, focusing on the non-investment grade debt market, which typically has higher coupon cash flow yield than other asset classes, including U.S. Treasuries, investment grade bonds, and municipals.
High yield bonds are typically issued with a maturity of five to ten years, but because HYLD primarily focuses on seasoned credits, their stated duration and maturity tend to be shorter than that of the market indexes, while their actual duration is generally even shorter due to early refinancings and take-outs via calls, poison puts, and tenders. Additionally, HYLD invests a portion of the portfolio in floating rate loans, which helps reduce the fund duration even further.
HYLD’ core team averages over 20 years each of in managing high yield corporate bonds and floating rate bank loans through various market cycles. In addition, HYLD’ management team has cultivated many important trading relationships over decades on Wall Street which they view as crucial to execution in the asset class.
A coupon is the interest rate stated on a bond when it's issued. Take-outs occur when a company decides to take out/refinance the bonds according to a scheduled price; poison puts reference the change of control from merger or buyout activity; tenders are company offers to buy a security at a set price. Duration measures (in years) the sensitivity of the price of a fixed-income investment to a 1% change in interest rates.A call is an option contract giving the owner the right, but not the obligation, to buy a specified amount of an underlying security at a specified price within a specified time.
HYLD takes a value-based, active credit approach to the markets, primarily focusing on the secondary market where HYLD believes there is less competition and more opportunities for capital gains.
Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s prospectus and Summary Prospectus, which may be obtained by visiting https://hyldetf.com/documents. Read the prospectus and Summary Prospectus carefully before investing.
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An investment in the Fund is subject to risk, including the possible loss of principal amount invested. Non-diversification exposes the Fund to greater market risk than if its assets were diversified among a greater number of issuers and/or sectors. High yield, lower rated bonds involve a greater degree of risk than investment grade bonds in return for higher yield potential. As such, securities rated below investment grade generally entail greater credit, market, issuer and liquidity risk than investment grade securities. Interest rate risk occurs when interest rates rise as bond prices usually fall This Fund may not be suitable for all investors.
Shares are bought and sold at market price (closing price) not net asset value (NAV) and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00pm Eastern Time (when NAV is normally determined) and do not represent the return you would receive if you traded at other times.