5 min readBy Ron Koren ETF Insider
How does the FDHY ETF work?
The FDHY ETF is a specialized investment fund that focuses on a specific sector. This exchange-traded fund offers investors exposure to a range of companies in this sector.
Fidelity Investments is the issuer behind the Fidelity High Yield Factor ETF (FDHY). Established with the goal of investing at least 80% of its assets in below-investment-grade debt securities, FDHY employs the ICE® BofA® BB-B US High Yield Constrained Index as a reference to structure the fund and choose its investments based on credit quality distribution and risk characteristics. The ETF primarily focuses on securities rated BB or B by S&P, Ba or B by Moody's, or those considered of comparable quality by nationally recognized credit rating agencies, including unrated options assessed by Fidelity Management & Research Company LLC (FMR). FDHY also has the flexibility to invest in companies facing financial challenges, both domestic and foreign issuers, utilizing a proprietary multifactor quantitative model to systematically select bonds with strong return potential and low default risk, employing a value and quality factor-based approach.
The First Trust High Yield Long/Short ETF (FDHY) may not be a traditional dividend-focused ETF, but it aims to provide investors with income potential through its unique approach to investing in high yield debt securities. FDHY typically invests at least 80% of its assets in below-investment-grade debt securities, often referred to as junk bonds. The ETF follows the ICE® BofA® BB-B US High Yield Constrained Index as a guide in structuring its portfolio, which helps in managing credit quality distribution and risk characteristics. While it primarily targets securities rated BB or B by S&P, Ba or B by Moody's, it may also invest in securities with higher or lower credit quality, including those from troubled or uncertain financial companies. FDHY utilizes a proprietary multifactor quantitative model to select bonds with strong return potential and low default probability, emphasizing value and quality factors in its methodology. This unique approach can provide investors with income potential, making it a distinctive option for those seeking both yield and credit risk management.
Tracking the dynamics of high-yield bonds is the primary objective of the Fidelity High Yield Factor ETF (FDHY). This ETF aims to closely follow the performance of an index composed of high-yield bonds, reflecting various sectors and issuers. FDHY provides investors with an opportunity to gain exposure to the high-yield debt market, offering a strategic investment option for those looking to navigate the dynamics of this fixed-income segment with the potential for enhanced returns.
The correlation aspect of the Fidelity High Yield Factor ETF (FDHY) is significant for investors seeking exposure to the high-yield debt market. FDHY typically invests in debt securities rated below investment grade, commonly known as junk bonds. Due to this investment strategy, FDHY tends to have a moderate to strong positive correlation with broader high-yield bond indexes, making it a suitable tool for gaining exposure to this segment of the fixed-income market. Investors often utilize FDHY's correlation with other fixed-income assets to gauge its potential for portfolio diversification and risk management.
The Franklin Liberty High Yield Corporate ETF (FDHY) is primarily involved in the high-yield debt sector. This ETF invests at least 80% of its assets in debt securities rated below investment grade, commonly known as junk bonds. It follows the ICE® BofA® BB-B US High Yield Constrained Index to structure its portfolio, focusing on credit quality distribution and risk characteristics. FDHY aims to offer investors exposure to higher-yield, higher-risk debt securities, making it suitable for those seeking potentially greater returns but with an increased level of risk compared to more conservative investments.
The exposure characteristics of the Fidelity High Yield Factor ETF (FDHY) focus on the high-yield debt securities segment of the investment landscape. This ETF typically invests at least 80% of its assets in below investment grade, or high yield, debt securities commonly known as junk bonds. FDHY utilizes the ICE® BofA® BB-B US High Yield Constrained Index as a reference point for structuring its portfolio and selecting investments based on credit quality distribution and risk characteristics. It predominantly targets securities rated BB or B by Standard & Poor''s (S&P), Ba or B by Moody''s Investors Service (Moody''s), or those similarly rated by other nationally recognized credit rating agencies. Additionally, FDHY may invest in securities of companies facing financial uncertainty and both domestic and foreign issuers. The ETF employs a proprietary multifactor quantitative model, screening over 1,000 bonds to select those with strong return potential and a low probability of default, utilizing a value and quality factor-based methodology.
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5 min readThe FDHY ETF is a specialized investment fund that focuses on a specific sector. This exchange-traded fund offers investors exposure to a range of companies in this sector.
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