Launched on 11/12/2014, the FlexShares Credit-Scored US Corporate Bond ETF (SKOR – Free Report) is a smart beta exchange traded fund offering broad exposure to the Investment Grade Corporate Bond ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Managed by Flexshares, SKOR has amassed assets over $464.25 million, making it one of the average sized ETFs in the Investment Grade Corporate Bond ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Northern Trust Credit-Scored US Corporate Bond Index.
The Northern Trust US Corporate Bond Quality Value Index measures the performance of a diversified universe of intermediate maturity, US – dollar denominated bonds of companies with investment grade credit quality, favourable valuations and enhanced short-term and long-term solvency.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.15%.
It has a 12-month trailing dividend yield of 4.90%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Cash accounts for about 0.59% of the fund’s total assets, followed by Citigroup Inc Callable Notes Variable 25/may/2034 (C – Free Report) and Jpmorgan Chase &no.38; Co Callable Notes Variable (JPM – Free Report) .
SKOR’s top 10 holdings account for about 3.17% of its total assets under management.
Performance and Risk
The ETF return is roughly 4.15% so far this year and is up about 4.51% in the last one year (as of 12/26/2024). In the past 52-week period, it has traded between $46.74 and $49.21.
SKOR has a beta of 0.23 and standard deviation of 5.12% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 1664 holdings, it effectively diversifies company-specific risk.
Alternatives
FlexShares Credit-Scored US Corporate Bond ETF is a reasonable option for investors seeking to outperform the Investment Grade Corporate Bond ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
SPDR Portfolio Intermediate Term Corporate Bond ETF (SPIB – Free Report) tracks Bloomberg Barclays Intermediate U.S. Corporate Index and the Vanguard Intermediate-Term Corporate Bond ETF (VCIT – Free Report) tracks Bloomberg Barclays U.S. 5-10 Year Corporate Bond Index. SPDR Portfolio Intermediate Term Corporate Bond ETF has $9.78 billion in assets, Vanguard Intermediate-Term Corporate Bond ETF has $47.95 billion. SPIB has an expense ratio of 0.04% and VCIT charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Investment Grade Corporate Bond ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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