Back at the tail end of 2022, I was looking for an investment instrument suitable for investors with a short-term time horizon.
You will need the instrument to break even within your short timeframe at the very least because… you need the money by then!
There is not a lot out there except for bond ETFs with short tenors or, on average, short tenors.
The iShares $ Short Duration High Yield Corp Bond UCITS ETF, or SDHA for short, is one ETF that I considered but ultimately deemed as too high risk.
I did invest $2400 of my personal money just to see how it works so I am reporting back.
What Does the iShares $ Short Duration High Yield Corp Bond UCITS ETF Invest in?
The ETF tracks the Markit iBoxx USD Liquid High Yield 0-5 Capped Index.
Thus, the ETF invests in a portfolio of high-yield fixed-income debt, and its portfolio performance is similar to that of the index.
To be included in the iBoxx index, the fixed income need to:
Rated BB+ or lower from Fitch or S&P Global, Ba1 or lower from Moody. Not default. At least 6 months of expected remaining life for new insertions, zero for existing holdings. US Dollars. Mature between 0 to 5 years. The index is market-cap weighted but each issuer is capped at 3%.
The ETF currently holds 1055 fixed-income issues.
Here is the portfolio broken down into its credit profile:
Even within fixed income with poorer credit ratings, there are grades to them.
So how different are the different grade of bonds?
I used to have this table lying around to give us a sensing how likely are the bonds likely to default based on a short history:
