The WisdomTree U.S. High Yield Corporate Bond ETF (QHY) was launched on 04/27/2016, and is a smart beta exchange traded fund designed to offer broad exposure to the High-Yield/Junk Bond ETFs category of the market.
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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.
Managed by Wisdomtree, QHY has amassed assets over $214.84 million, making it one of the average sized ETFs in the High-Yield/Junk Bond ETFs. QHY, before fees and expenses, seeks to match the performance of the WISDOMTREE US HIGH YIELD CORP BOND INDEX.
The WisdomTree U.S. High Yield Corporate Bond Index is a rule-based alternatively weighted Index designed to capture the performance of selected issuers in the U.S. high yield corporate bond market that are deemed to have attractive fundamental and income characteristics.
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.38%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 6.32%.
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Dreyfus Trsy Oblig Cash Mgmt Cl Ins accounts for about 1.41% of the fund’s total assets, followed by Mpt Oper Partnersp/finl 5% 10/15/2027 and United Airlines Inc 4.625% 4/15/2029.