HYGV

The case for high yield

• We believe high yield bonds have advanced from a specialty fixed income investment to a strategic, mainstream asset held across most diversified portfolio allocations. Once viewed as being the ”penalty box” for wayward public debt issuers, over the years the sector has transformed into a dynamic, competitive marketplace for capital raising and refinancing. A multitude of forces were needed to bring high yield out of the shadows and into the spotlight. Now the sector is ready for a further evolution that combines earlier high yield principles with new techniques to again deliver truly high income strategies for today’s investors.
• A case for implementing high yield within a portfolio may be evidenced by the historic role yield income has played in compensating for higher credit risk. Research by the Northern Trust Asset Management Fixed Income Group of the Bloomberg Barclays US High Yield Index indicates that, historically, the coupon/yield* on a fixed income portfolio contributed more than 100% of overall returns for the December 1993 to December 2023 period.
• In order to benefit from the current high yield market, investors may want to return to high yield basics. We believe investors may be better served by high yield products that combine contemporary approaches with the keystone principle of high yield investing: focus on the “yielding” aspects of high yield.
• Focus on maximizing the value factor. The fund utilizes the Northern Trust Credit Scoring methodology to eliminate the bottom 10% of issuers while also performing a liquidity** assessment based on the issuer’s current debt outstanding, age and remaining time to maturity with the purpose of eliminating the bottom 5% illiquid securities.

To learn more about the FlexShares High Yield Value-Scored Bond Index Fund - visit the HYGV fund page today.

* Coupon is  the interest payment that a bond issuer promises to make to a bondholder until the bond matures. The yield, is the annual percentage of the bond's principal that the coupon represents.

** Liquidity is a market's ability to facilitate the purchase or sale of an asset without causing drastic change in the asset's price.