ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Artificial Intelligence
      • Beyond Basic Beta
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Direct Indexing
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Investing
      • ETF Education
      • ETF Strategist
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Institutional Income Strategies
      • Leveraged & Inverse
      • Managed Futures
      • Market Insights
      • Modern Alpha
      • Multifactor
      • Responsible Investing
      • Retirement Income
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Commodities
        • Gold/Silver/Critical Minerals
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Multi-Asset Channel
  2. Score Looks High With This Unique Corporate Bond ETF
Multi-Asset Channel
Share

Score Looks High With This Unique Corporate Bond ETF

Aaron NeuwirthSep 04, 2019
2019-09-04

With investors scrambling to find additional income in today’s low-yield climate, corporate bonds and the related ETFs could be popular destinations. One way to add some quality to that asset class is with the FlexShares Credit‐Scored US Corporate Bond Index Fund (SKOR B).

SKOR is not the run of the mill corporate bond ETF. The new ETF tracks the Northern Trust Credit-Scored US Corporate Bond Index, which focuses issues from companies with quality characteristics such as strength in management efficiency, profitability, and solvency, according to FlexShares.

SKOR holds 357 corporate bonds and has a 30-day SEC yield of 2.51%. The fund is up nearly 8% year-to-date and resides near all-time highs. The ETF moves beyond relying solely on traditional corporate bond ratings as a metric of quality.

“Until the economic crisis of 2008, many investors relied on the ratings provided by the nationally recognized statistical rating organizations (NRSROs) to help make the full determination of creditworthiness of an individual bond issuer,” said FlexShares in a recent research piece. “In recent years, however, we developed a quantitative model that we believe helps identify and respond to changing issuer/industry information and shifting macro environments.”

Working On Keeping SKOR

SKOR’s underlying index only includes issues with at least $500 million outstanding. SKOR intentionally excludes smaller, illiquid issues to enhance its liquidity and transparency profile. As is the case with many corporate bond ETFs, SKOR is heavily allocated to financial services issuers (just over 50%) because of that sector’s massive issuance of corporate debt following the global financial crisis.

SKOR allocates 53% of its weight to bonds rated BBB and 38.39% to corporate debt rated A. There were concerns about BBB-rated debt heading into this year, but those worries have mostly been allayed.

“To make a long story short, as the Federal Reserve raised interest rates four times last year, some bond market observers fretted that issuers behind BBB-rated debt could be pinched if the economy slowed because many of those companies took advantage of low-interest rates and issued more debt. Then downgrades could come, forcing trillions of dollars of once IG debt into junk territory,” according to Nasdaq.

Related: Looking for Trade War Protection? Look to Corporate Bond ETFs

SKOR’s scoring methodology indicates the fund is appropriate for a broad swath of investors, including those looking to reduce risk.

“The FlexShares Credit Scoring Model addresses the corporate bond liquidity challenge by optimizing a carefully selected subset of all credit issuers of which illiquid, orphaned and small lot names have been removed,” according to FlexShares. “The model also takes into account multiple factors to aid in developing improved corporate bond indexes, including the characteristics of issuers’ total debt structure, minimum exposure percentages, and odd-lot trade restrictions.”

This article originally appeared on ETFTrends.com.


Content continues below advertisement

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X