USAA Launches First ETF Lineup

October 26, 2017

iShares Debuts ‘USHY’

iShares is breaking new ground in the world of fixed-income ETFs today with the launch of the iShares Broad USD High Yield Corporate Bond ETF (USHY).

The fund goes beyond the reach of the iShares iBoxx $ High Yield Corporate Bond ETF (HYG)—the largest junk bond fund, with $20 billion in assets—by tapping into a broader universe of dollar-denominated high-yield bonds in the U.S., owning roughly twice as many bonds as HYG from 2.5 times as many issuers.

USHY offers that broader exposure for less than half the cost of HYG—it comes to market with an expense ratio of 0.22%, or $22 per $10,000 invested, which compares to HYG’s 0.49% price tag.

These corporate bonds in the portfolio, according to the company, may have “risk exposure” to other regions outside the U.S., including Japan, U.K., Canada, Australia, New Zealand, Switzerland, Norway, Sweden and the eurozone. Ultimately, USHY tilts smaller and should deliver an incrementally higher yield than HYG, which has a current 30-day yield of 4.7%.

“This high-yield ETF is designed specifically to address investor demand to cover a much broader representation of the high-yield market,” said Steve Laipply, head of iShares fixed income strategy.

There’s really no funds quite like USHY on the market today, according to Laipply, who says the fund’s launch is part of what BlackRock sees as an ongoing “modernization” of the bond market, with product development and asset growth picking up pace.

USHY joins other high-yield bond ETFs, including the global iShares International High Yield Bond ETF (HYXU), which is a local currency take on high yield bonds, and the competing First Trust Tactical High Yield ETF (HYLS), which is an actively managed long/short high-yield bond portfolio that’s not limited to dollar-denominated bonds.

So far this year, these strategies have delivered various results, all outperforming the iShares Core U.S. Aggregate Bond ETF (AGG).

 

http://stockcharts.com/c-sc/sc?s=HYG&compare=HYXU,HYLS,AGG&id=t11839620947&r=1508953788247

Chart courtesy of StockCharts.com

 

USHY tracks the BofA Merrill Lynch U.S. High Yield Constrained Index, a modified market-value-weighted index with more than 1,800 holdings, and a cap on each issuer of 2%. 

Contact Cinthia Murphy at [email protected]

 

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