The fund tracks the ICE BofA BB-B US High Yield Constrained Index and diversifies across more than 1,000 high-yield corporate bonds with relatively low default risk. By capping the weight of any single issuer at a set level, it manages company-specific risk while capturing a broad range of return opportunities.

It suits bond investors who want to raise the overall income level of their portfolio while avoiding excessively risky distressed debt.

It is a passively managed (index-tracking) ETF launched by Nuveen in 2016.

Even within the lower-rated bond market, the fund selects and holds bonds from companies with comparatively healthy finances. While faithfully replicating the performance of the market index, it sets issuer limits to help ease the volatility that is typical of high-yield bonds.

• Maintains a low fee structure even within the high-yield category
• Credit selection strategy that excludes lower-rated bonds with high default risk
• Broad diversification across thousands of bonds to spread out individual risk

Assets under management (AUM) stand at $1.8B, and the expense ratio is 0.08% per year.

It keeps fees lower than the category's flagship products such as HYG and JNK, so over a long holding period the cost savings noticeably improve the real return.

The fund tends to perform well when interest rates fall or the economy recovers and companies' interest burdens ease, and it moves with a somewhat high correlation to equity market volatility.

Income-focused demand for relatively high dividend yields keeps flowing in, and the fund is expanding its market share as money moves toward low-fee bond ETFs.

Its main appeal is exposure to upper-tier high-yield bonds at a low cost, but investors should consider credit risk during a recession and volatility driven by interest rate changes.

USHY and SPHY, which are compared in the table, are competing products that, like NHYB, follow a low-fee strategy. If you want to invest in the broader high-yield market as a whole, USHY is an option, and if you want high liquidity and an options market, HYG can be an alternative despite its higher fee. If you also want to focus on fallen angel bonds, we recommend reviewing the ANGL (fallen angel bond) series together to adjust the volatility of your bond portfolio.

These are the key points to check before investing in NHYB. Decide your allocation by considering the characteristics of high-yield bonds and your own risk tolerance.

Even though it is a bond fund, there are many periods when it moves similarly to the stock market, so investors should note that the diversification benefit may be limited in portfolios with a high equity weighting.

It is a core bond asset suited to smart income investors who seek stable high income and low costs at the same time. From a long-term perspective, it is an appropriate product for reinvesting distributions and enjoying the effect of compounding.