Using the Ice BofA US High Yield Constrained Index as its benchmark, the fund invests most of its assets in higher-yielding bonds rated below investment grade. Depending on market conditions, it takes an active approach to managing risk, such as raising its cash allocation or using Treasuries as a defense.

It suits aggressive bond investors who can tolerate price swings in the bond market and want higher interest income than conventional bonds provide.

Launched by First Trust in 2013, it is an actively managed ETF.

The fund thoroughly analyzes the credit risk and default likelihood of individual bonds to find high-quality high-yield issues. By tactically adjusting the portfolio to interest rate changes and the economic cycle, it aims to manage downside risk and capture return opportunities compared with simple index tracking.

• Tactical asset allocation that responds nimbly to changes in the market environment
• Stable cash flow generated through monthly distributions

Assets under management (AUM) stand at $1.6B, and the expense ratio is 0.69% per year.

It targets higher yields than general bond ETFs such as BNDX and IUSB shown in the table, but given the nature of high-yield bonds, its credit risk and expense level tend to be higher.

Supported by stabilizing interest rates and solid corporate earnings, high-yield bond returns have been favorable, and improving financial health among issuers has been underpinning prices.

Capital seeking relatively high dividend income has been flowing into the high-yield asset class, and the pace of inflows is highly sensitive to shifts in market risk appetite.

Its strengths are high monthly income and risk management through tactical management, but price declines driven by credit risk can be large during a recession.

PYLD, shown in the table, is a competing active product that invests across multiple sectors. For those who want to invest in the high-yield market at a lower cost, leading passive index ETFs such as HYG and JNK can be alternatives. To reduce duration risk, consider SJNK or SHYG, and for broad high-yield exposure, USHY or HYLB are also worth reviewing.

Here is a key checklist to review when investing in the First Trust Tactical High Yield ETF (HYLS). Investors should be fully aware of the risks behind the high yield.

During economic downturns, credit spreads on high-yield bonds widen, and the bonds can suffer large declines comparable to those of the stock market. In addition, active management does not always guarantee outperformance versus the index.

It suits aggressive bond investors who seek stable monthly income while wanting expert tactical management. It works well as a supplementary asset that lifts a portfolio's yield.