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Monday, October 23, 2023

High Yield ETF's

By Century Financial in 'Investment Insights'

High Yield ETF's
Brent-WTI Spread Trade

*Trading in the financial market carries risk and can result in loss of capital.
*Statistics or Past performance is no guarantee of future results

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The product and investment ideas do not consider the risk profile and financial position of the recipient and may not be suitable for everyone. Trading in financial markets and the use of leverage involves a significant risk of loss, which can exceed deposits. Please read the complete Disclaimer carefully

Risk and Assumptions:

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The Flyer contains list of ETF's that can be currently looked at to target high yields.
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Owing to their overall profile, these ETF's belong to high risk category.
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In case of a major recession/outright fixed-income default in the US senior loan or the high yield sector, these ETFs could witness depreciation / negative losses in their prices.
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In a worst case, the percentage price losses may exceed the dividend income yield. This could make the overall total returns negative for the ETF

Global Scenario of High Interest Rates - Few ETF's to watch out for

Rationale The rise in inflation seen over the past has caused a tectonic shift in the overall fixed-income returns profile. Investors are now targetting fixed income returns that will beat the 1-year US Treasury Bills which is currently yielding near 5%. The below ETFs belong to the high risk , high income return senior loan and high yield corporate bonds sector
Invesco Senior Loan ETF The Invesco Senior Loan ETF is designed for investors seeking high-income potential, rising rate protection, and diversification by investing in senior loans. A senior secured loan is a corporate loan repackaged into a bundle of other corporate loans that are sold to investors. Senior loans are typically rated below investment grade, partly explaining their higher yields. The ETF BKLN tracks the Morningstar LSTA US Leveraged Loan 100 Index, which includes the 100 largest and most liquid senior secured loans within the broader universe.
SPDR Blackstone
Senior Loan ETF
The SPDR Blackstone Senior Loan ETF seeks to provide potential high income yield with investments in the senior loan market. In pursuing its investment objective, the Fund seeks to outperform the Markit iBoxx USD Liquid Leveraged Loan Index and the Morningstar LSTA US Leveraged Loan 100 Index.
Flex Shares High Yield Value Scored Bond Fund The Fund seeks investment results that correspond to the price and yield performance of the Northern Trust High Yield Value-Scored US Corporate Bond Index. High-yield bonds have advanced from a speciality fixed-income investment to a strategic, mainstream asset held across most diversified portfolio allocations.
ETF Details
Sr No Product Ticker Last
Price
Underlying Index
Tradcker
Total AUM
($ Million)
Expense
Ratio
52 Week
High
52 Week
Low
YTD Total
Returns
30 Day
Average
Trading
Volume
1 Invesco Senior Loan ETF $ BKLN US
Equity
$21.02 Morningstar LSTA
Leveraged Loan Index 100
$4,582.85 0.66% $21.27 $20.33 9.26% 8,796,231
2 SPDR Blackstone Senior
Loan ETF
$ SRLN US
Equity
$41.66 iBoxx Liquid Leveraged
Loan Index
$4,230.00 0.70% $42.22 $40.62 8.34% 1,850,059
3 Flex Shares High Yield Value
Scored Bond Fund
$ HYGV US
Equity
$38.88 Northen Trust High Yield
Value Scored US Corporate
Bond Index
$1,230.00 0.37% $42.04 $38.72 4.23% 350,000
Dividend Yield Details
Ticker SEC 30
Day Yield
Net
Indicated Yield
Dividend
Frequency
1 Year
Dividend Growth
3 Year
Dividend Growth
5 Year
Dividend Growth
$ BKLN 8.08% 9.69% Monthly 132% 26.93% 14.93%
$ SRLN 9.35% 9.22% Monthly 54.46% 13.67% 13.67%
$ HYGV 9.98% 9.32% Monthly 8.87% 6% 23.10%
$ Dividend Received/Unit
Ticker YTD 2022 2021 2021 2019 2018
$ BKLN $1.36 $1.01 $0.69 $0.79 $1.11 $0.98
$ SRLN $2.57 $2.34 $2.03 $2.24 $2.51 $2.23
$ HYGV $2.67 $3.04 $2.60 $3.03 $3.86 $2.56

Risks and Assumptions related to Back-tested trading strategies
The risks and assumptions listed here are not intended to be an exhaustive summary of all the risks and assumptions involved.
The strategy might suffer from look-ahead bias which occurs due to the use of information or data in a study or simulation that would not have been known or available during the period being analyzed. This can lead to inaccurate results in the study or simulation.
Future price movements may not be exactly the same as the historical price movements and this could lead to variation in performance.
Testing can sometimes lead to over-optimization. This is a condition where performance results are tuned so high to the past they are no longer as accurate in the future.
The model assumes no slippages in trading. Slippage refers to the difference between the expected price of a trade and the price at which the trade is actually executed.
The back-tested strategy might be at risk of data dredging, which is the behavior of testing multiple hypotheses at one time, resulting in picking the data that best supports your main hypothesis.
Drawdowns in actual trading can be higher than the tested system and losses could be significant in the event of leverage.
Unforeseen events can lead to variation in performance from the tested trading strategy.
The tested result has been computed with price feeds available from Bloomberg.
The testing environment has not considered transaction or any other costs.
Trading indicators used for the purpose of testing has been provided by Bloomberg.
The strategy might suffer from data mining fallacy, selection bias and backfill bias.
A trading strategy that performs well on multiple datasets from one market (e.g., forex) might not perform as well in another market (e.g., stocks).
The strategy may not depict accuracy in terms of spread changes due to the spread-widening events.

Data Source: Bloomberg
Data & Prices as of: 17/10/2023

Arun Leslie John
Chief Market Analyst

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