Is Invesco Fundamental High Yield Corporate Bond ETF (PHB) a Strong ETF Right Now?
The Invesco Fundamental High Yield Corporate Bond ETF (PHB) was launched on 11/15/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the High-Yield/Junk Bond ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Managed by Invesco, PHB has amassed assets over $571.56 million, making it one of the larger ETFs in the High-Yield/Junk Bond ETFs. This particular fund, before fees and expenses, seeks to match the performance of the RAFI Bonds US High Yield 1-10 Index.
The RAFI Bonds US High Yield 1-10 Index is comprised of US dollar-denominated bonds that are registered with the SEC or that are Rule 144A securities that provide for registration rights and whose issuers are public companies listed on a major US stock exchange.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.50% for this ETF, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 3.62%.
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, Centene Corp-4.62%-12-15-2029 accounts for about 2.07% of the fund's total assets, followed by United Airlines Holdings Inc-4.88%-1-15-2025 and Ford Motor Credit Co Llc-3.38%-11-13-2025.
The top 10 holdings account for about 15.99% of total assets under management.
Performance and Risk
So far this year, PHB has gained about 2.16%, and is down about -2.41% in the last one year (as of 03/31/2023). During this past 52-week period, the fund has traded between $16.37 and $18.47.
The fund has a beta of 0.43 and standard deviation of 8.43% for the trailing three-year period, which makes PHB a high risk choice in this particular space. With about 162 holdings, it effectively diversifies company-specific risk.
Invesco Fundamental High Yield Corporate Bond ETF is not a suitable option for investors seeking to outperform the High-Yield/Junk Bond ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares Broad USD High Yield Corporate Bond ETF (USHY) tracks BofA Merrill Lynch U.S. High Yield Constrained Index and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) tracks Markit iBoxx USD Liquid High Yield Index. IShares Broad USD High Yield Corporate Bond ETF has $8.71 billion in assets, iShares iBoxx $ High Yield Corporate Bond ETF has $13.30 billion. USHY has an expense ratio of 0.15% and HYG charges 0.48%.
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.
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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Invesco Fundamental High Yield Corporate Bond ETF (PHB): ETF Research Reports
iShares iBoxx $ High Yield Corporate Bond ETF (HYG): ETF Research Reports
iShares Broad USD High Yield Corporate Bond ETF (USHY): ETF Research Reports
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