The FlexShares High Yield Value-Scored Bond Index Fund (HYGV) that began trading on Wednesday puts the spotlight on the value factor, which FlexShares believes gives it a competitive advantage in a crowded marketplace.

HYGV employs the proprietary credit scoring model of FlexShares’ parent company, Northern Trust, to focus on the value factor while screening for quality and liquidity risk from a universe of U.S.-dollar denominated high-yield corporate bonds rated below investment grade and not in default.

There are 54 high-yield bond ETFs, according to ETFdb. Given the crowded playing field, any new fund in this segment needs to deliver something different to grab attention.

"The vast majority of high-yield strategies available today focus on simply delivering beta exposure to the asset class with little regard to addressing the factors that drive high-yield performance," says Mark Carlson, senior investment strategist at FlexShares. "By focusing a strategy on what we believe to be the key factor in high-yield performance, we seek to provide better risk-adjusted, long-term returns for investors’ high-yield allocations. 

HYGV's weighted average yield to maturity is 7.26 percent. Carlson says that figure tops three commonly cited high-yield indexes: the ICE BofAML US High Yield Index (6.59 percent), iBoxx $ Liquid High Yield Index (6.45 percent) and Bloomberg Barclays US Corporate High Yield Index (6.59 percent). 

Regarding HYGV, the fundamentals of the bond issuers are evaluated against current market conditions, and the lowest-quality issuers are excluded from the fund's underlying Northern Trust High Yield Value-Scored US Corporate Bond Index. 

As for the value score, that's a quantitative ranking based on valuation metrics that assess a security’s relative value (i.e., potential for yield), a spread analysis that gauges a security’s risk/return trade-off, and solvency metrics that assess the issuer’s short-term and long-term solvency and default risk.

Liquidity assessments are based on an issuer’s debt outstanding, age and remaining time to maturity.

The HYGV fund contains 257 U.S. dollar-denominated securities from nine countries and the Cayman Islands, a British overseas territory. U.S.-based securities make up the largest country weight by far at nearly 82 percent.

The fund’s weighted average maturity is 6.98 and its weighted average effective duration is 4.16. The net expense ratio is 0.37 percent.