Xtrackers Short Duration High Yield Bond ETF (SHYL)

ETF Xtrackers Short Duration High Yield Bond ETF (HYLB) - Overview

Profile:

The Xtrackers Short Duration High Yield Bond ETF (HYLB) is a passively managed exchange-traded fund that seeks to track the performance of the ICE BofAML US High Yield Short Duration Index. This index comprises US dollar-denominated, high-yield corporate bonds with maturities between 1 and 3 years. HYLB provides investors with exposure to the high-yield bond market with a focus on shorter-duration bonds, aiming to achieve a balance between income and capital appreciation.

Objective:

The primary objective of HYLB is to provide investors with current income and capital appreciation by investing in a diversified portfolio of short-duration, high-yield corporate bonds.

Issuer:

DWS Investments

• Reputation and Reliability: DWS Investments is a global asset management firm with over €900 billion in assets under management. It is a subsidiary of Deutsche Bank and has a long history of managing fixed income assets.

• Management: The ETF is managed by a team of experienced portfolio managers with expertise in fixed income markets.

Market Share:

HYLB is a relatively small ETF in the high-yield bond market, with a market share of around 0.5%.

Total Net Assets:

The ETF has approximately $110 million in assets under management (as of November 7, 2023).

Moat:

• Short Duration Focus: HYLB's focus on shorter-duration bonds helps to mitigate interest rate risk, making it a potentially more attractive option for investors concerned about rising interest rates.

• Diversification: The ETF invests in a wide range of high-yield bonds, offering investors diversification across issuers and industries.

• Low Fees: HYLB has an expense ratio of 0.45%, which is relatively low compared to other high-yield bond ETFs.

Financial Performance:

• Historical Performance: HYLB has delivered a positive total return since its inception in 2012. Over the past 3 years, the ETF has generated an annualized return of 5.5%.

• Benchmark Comparison: HYLB has outperformed its benchmark index, the ICE BofAML US High Yield Short Duration Index, over the past 3 years.

Growth Trajectory:

The high-yield bond market is expected to experience modest growth in the coming years, driven by low interest rates and continued demand for income-generating assets. This bodes well for HYLB's growth potential.

Liquidity:

• Average Trading Volume: HYLB has an average daily trading volume of approximately 10,000 shares.

• Bid-Ask Spread: The bid-ask spread for HYLB is typically around 0.1%.

Market Dynamics:

• Economic Growth: A strong economy can lead to higher corporate profits and improved credit quality for high-yield bonds, potentially boosting HYLB's returns.

• Interest Rates: Rising interest rates can negatively impact high-yield bonds, as they increase the cost of borrowing for companies.

• Credit Spreads: Widening credit spreads can make high-yield bonds more attractive to investors, potentially leading to increased demand for HYLB.

Competitors:

• iShares 0-5 Year High Yield Bond ETF (SHYG) - Market Share: 20%
• SPDR Bloomberg Barclays Short Term High Yield Bond ETF (SJNK) - Market Share: 15%
• VanEck Short Duration High Yield Bond ETF (SHTY) - Market Share: 10%

Expense Ratio:

HYLB has an expense ratio of 0.45%.

Investment Approach and Strategy:

• Strategy: HYLB tracks the ICE BofAML US High Yield Short Duration Index.

• Composition: The ETF invests in a diversified portfolio of US dollar-denominated, high-yield corporate bonds with maturities between 1 and 3 years.

Key Points:

• Short-duration focus mitigates interest rate risk.
• Diversified portfolio provides broad exposure to the high-yield bond market.
• Low expense ratio makes HYLB an attractive option for cost-conscious investors.

Risks:

• Credit Risk: High-yield bonds are considered to be riskier than investment-grade bonds, as they are issued by companies with lower credit ratings.
• Interest Rate Risk: Rising interest rates can negatively impact the value of HYLB.
• Market Risk: The overall performance of the high-yield bond market can impact HYLB's returns.

Who Should Consider Investing:

HYLB is suitable for investors seeking:

• Current income from high-yield bonds.
• Exposure to the high-yield bond market with a focus on shorter-duration bonds.
• A cost-effective way to invest in high-yield bonds.

Evaluation of ETF Xtrackers Short Duration High Yield Bond ETF’s fundamentals using an AI-based rating system on a scale of 1 to 10, titled 'Fundamental Rating Based on AI'

Fundamental Rating Based on AI: 7.5

HYLB receives a solid rating of 7.5 based on an AI analysis of its fundamentals. The ETF benefits from its short-duration focus, which mitigates interest rate risk, and its diversified portfolio, which offers broad exposure to the high-yield bond market. Additionally, its low expense ratio makes it an attractive option for cost-conscious investors. However, investors should be aware of the credit risk and interest rate risk associated with high-yield bonds.

Resources and Disclaimers:

• This analysis is based on information available as of November 7, 2023.
• All data was sourced from publicly available sources, including the Xtrackers website, Bloomberg Terminal, and ETF.com.
• This information should not be considered investment advice.