Assessing the Attraction of the iShares High Yield Active ETF (BRHY) in a High-Yield Bond Market Downturn

The iShares High Yield Active ETF (BRHY) has emerged as a compelling option for investors navigating the turbulence of the high-yield bond market in 2025. Amid a U.S. economic slowdown, rising trade policy uncertainty, and a Federal Reserve caught between inflation control and growth support, BRHY’s active management and strategic positioning have bolstered its dividend stability and resilience. This article evaluates BRHY’s performance during the 2023–2025 credit market volatility, focusing on its dividend consistency, portfolio adjustments, and risk mitigation strategies.

Dividend Stability: A Pillar of BRHY’s Appeal

BRHY’s dividend yield of 6.52% as of August 2025, with an ex-dividend date of August 1, underscores its attractiveness for income-focused investors [1]. This yield, above the 6.83% category average, reflects the fund’s focus on non-investment grade bonds with maturities of ten years or less, which typically offer higher coupons to compensate for credit risk [2]. Unlike equities like Berry Corporation (BRY), which saw its dividend fluctuate by 75% between 2024 and 2025, BRHY has maintained a consistent monthly dividend structure, demonstrating the advantages of active management in stabilizing income streams [3].

The fund’s managers, Mitchell Garfin and David Delbos, have leveraged their expertise in high-yield and leveraged loan strategies to prioritize companies with strong liquidity and hedging practices. For instance, BRHY’s portfolio includes hedged oil production and robust liquidity positions, which mitigate cash flow risks during downturns [4]. This contrasts with BRY’s 5% annualized yield, which, while attractive, relies on a single company’s ability to navigate volatile commodity markets [5].

Strategic Portfolio Positioning Amid Credit Volatility

BRHY’s active management has enabled dynamic adjustments to credit quality and sector allocations. During the 2023–2025 period, the fund outperformed its category, returning 5.7% year-to-date in July 2025 compared to the High Yield Bond category’s 0.3% [6]. This outperformance was driven by a 21% portfolio turnover rate—lower than the category’s 51% average—indicating a disciplined approach to trading [7].

The fund’s 838-security portfolio, with 19.4% concentrated in the top 10 holdings, reflects a balance between diversification and sector specialization. Garfin and Delbos have reallocated capital toward sectors like commodities and consumer cyclicals, which have shown resilience despite macroeconomic headwinds [8]. For example, the fund’s exposure to utilities and industrials—sectors with historically stable cash flows—has provided a buffer against trade policy shocks [9].

Credit quality adjustments have also been pivotal. While the U.S. sovereign credit rating downgrade by Moody’s in May 2025 heightened market jitters, BRHY’s focus on short-duration, high-yield bonds reduced its sensitivity to long-term rate volatility [10]. The fund’s managers have further mitigated risk by avoiding overexposure to weaker credits, as evidenced by its 93.3% bond allocation (80.5% domestic, 12.8% foreign) [11].

Risk Mitigation and Long-Term Resilience

BRHY’s risk management strategies extend beyond credit quality. The fund’s active approach includes real-time monitoring of Days Beyond Terms (DBT) trends and scenario planning to anticipate geopolitical or sector-specific shocks [12]. For instance, during the April 2025 tariff announcements that spiked high-yield spreads, BRHY’s managers increased cash holdings and reduced exposure to trade-sensitive industries, cushioning the fund from the worst of the volatility [13].

Moreover, BRHY’s non-diversified structure allows it to capitalize on concentrated opportunities in high-yield markets, a strategy that has paid off during periods of dispersion in credit spreads. While weaker credits traded wider spreads, BRHY’s managers selectively added to stronger credits with tighter spreads, enhancing risk-adjusted returns [14]. This agility is a hallmark of active management and a key differentiator from passive high-yield ETFs.

Conclusion

The iShares High Yield Active ETF (BRHY) exemplifies how active management can enhance dividend stability and strategic positioning in a volatile high-yield market. By leveraging experienced portfolio managers, dynamic credit adjustments, and sector specialization, BRHY has navigated the 2023–2025 downturn with resilience. For investors seeking income and capital preservation, BRHY’s disciplined approach offers a compelling case for inclusion in a diversified portfolio.

Source:
[1] iShares High Yield Active ETF (BRHY) Dividend History [https://www.nasdaq.com/market-activity/etf/brhy/dividend-history]
[2] iShares High Yield Active ETF | BRHY [https://www.ishares.com/us/products/337564/ishares-high-yield-active-etf]
[3] BRY Dividend Information [https://marketchameleon.com/Overview/BRY/Dividends/]
[4] Berry Corporation Liquidity and Hedge Update [https://bry.com/berry-corporation-provides-update-on-strong-hedge-and-liquidity-position-underpinning-stable-cash-flow-generation-announces-upcoming-conference-participation/]
[5] BRHY Dividend Yield [https://stockanalysis.com/etf/brhy/dividend/]
[6] AAII ETF Performance Data [https://www.aaii.com/etf/ticker/BRHY]
[7] BRHY Portfolio Turnover [https://www.aaii.com/etf/ticker/BRHY]
[8] BlackRock Manager Expertise [https://www.blackrock.com/us/individual/products/337564/ishares-high-yield-active-etf]
[9] Sector Allocation Resilience [https://www.blackrock.com/us/financial-professionals/insights/investment-directions-fall-2025]
[10] U.S. Credit Rating Downgrade Impact [https://deepblue-inv.com/moodys-downgrade-may-2025/]
[11] BRHY Portfolio Composition [https://www.aaii.com/etf/ticker/BRHY]
[12] Credit Risk Mitigation Strategies [https://commandcredit.com/blog/credit-risk-management-strategies-2025]
[13] Tariff-Driven Portfolio Adjustments [https://www.guggenheiminvestments.com/perspectives/sector-views/high-yield-and-bank-loan-outlook-may-2025]
[14] Credit Spread Dispersion [https://www.pinebridge.com/en/insights/where-we-see-value-in-credit-markets-in-2024]