YYY - YYY: The Worst May Not Be Over For Nearly Distressed Debt

• YYY is a popular ETF that pays a dividend yield over 10%, however it is exposed to the most depressed industries that are failing to recover from COVID lockdowns.
• Before the election, YYY was looking bearish due to a small rise in credit spreads, credit downgrades, and bankruptcies.
• Despite the post-election exuberance, 2021 will see most covenant waivers and forbearance efforts end, meaning distressed companies will have limited access to financing and may declare Chapter 11.
• Not only does YYY have significant downside risk, but it also has a total expense ratio over 2% which takes away much of its alpha-potential.
• YYY may be a good option once it is clear lockdowns are permanently over. Until then, the fund is probably best avoided.

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