SHYD is a sister fund to the HYD I hold but lower in average duration. It is very low cost relative to the short term corporate HY such as RPHYX or STHBX, more volatile and higher return than those but less riskier than HYD or other high yield munis. There aren't many short-intermediate term muni alternatives. It is a very new fund.
Not for all portfolios but might fit those looking to diversify with shorter duration bond funds, or those overweighted in short term corporate or short term treasuries. Even in tax-deferred accounts.
Comments
First, I wasn't recommending HYD here which belongs to a relatively high volatility category. The fund itself just follows the category as an index fund. Particularly good for momentum players as the most liquid ETF in the category. As an index fund it follows the category unlike managed funds which might provide drawdown protection at the expense of upside like TSSAX for example in this category.
The premise of the calculations and ratings on this site favors the latter over the former to give better "numbers". But better risk adjusted numbers don't necessarily provide for a better total return at the end of an investment period. The longer the time period for investment, the greater the difference between the two where capital protection extracts its cost over the protection in bear markets in that category. This is why I prefer index funds over any highly rated funds here (as long as one is available) in long time horizons, with a glide slope to risk managed funds as the horizon gets shorter.
The point is that these numbers in the dashboard are good for comparing two funds that are otherwise similar in the same category but not to make absolute statements as to whether a fund should be used in a portfolio or not on its own which depends on the portfolio allocation strategy. It should never be used to decide between funds in two different categories ignoring the portfolio allocation strategy because one has a better risk group or return group ratings. It is a bit like treadwear numbers on a tire.
The case for the category of SHYD (and therefore this index in it) is in allocations where the volatility of HYD is too much to accommodate. Munis have been problematic in portfolios because the regular munis are priced for maximum tax benefits and so not great unless one can benefit fully from it at the highest tax brackets.
The high yield category has been an exception where the credit quality based returns lessen that tax-treatment spread. This is evident in things like HYD or TSSAX where the total returns were of interest even if one didn't get the full tax benefits.
The problem is that such HY munis have been too volatile for conservative portfolios and even some moderate portfolios. Same problem with HY corporate bonds as well.
The case for funds like RPHYX or STHBX is to tame that volatility by taking away the interest rate sensitivity especially given where we are in the rate cycle and some capital protection with active management. But the result is relatively anemic returns even if they come out good in risk-adjusted returns.
I see the category of S/T HY munis as bridging that gap and a good diversifier (not a replacement) for the short term bond buckets in conservative portfolios which typically have short term corporates and treasuries or active risk managed short term HY corporates whose total returns have been rather restrained.
Hence, the suggestion to take a look at this fund/category. It may or may not fit your portfolio allocation strategy, if you have one!
Hopefully, the long-winded explanation will encourage people to think a bit more about their portfolio allocation and fund selection relative to that than plugging it blindly into a dashboard and seeing what color pops up.
Otherwise, it will be as bad as selecting based on M* ratings!
Yeah, I'm programmed to compare. My bad.
I absolutely agree that it does not matter how a fund compares within its category if it fits right in your portfolio (eg., ARIVX). That's more important.
The muni high yield category has certainly been impressive the past few years. And muni's don't get talked about much on the board. Come to think of it, I can't remember an MFO profile done in this category. So, good to have the mention here.
More soon...need to get some sleep and couple things to do tomorrow before revisiting board.
Hope all is well.
Charles
I took a closer look at funds in the High Yield Muni category since HYD inception.
There are 31 funds that have been around 61 months or more through this March. HYD is the only EtF in the bunch. The few other EtFs in this category are younger.
Many of the funds are loaded and/or impose early redemption fees.
Honestly, most have done pretty well and rather small values (versus say equities) can move the risk adjusted return rankings.
Here is summary sorted by annualized return...all metrics, including risk and return rankings based on performance since Mar '09.
Here's same list sorted by Martin:
Your comments highlight the problem with meaningfully interpreting results of a search like this.
Shouldn't there be a primer somewhere on the site that explains how to use the data for fund selection or portfolio allocation? Otherwise, people may make inappropriate conclusions based on numbers and colors.
Information like what is the "margin of error" in these rankings (for example based on the day to day or month to month variability in returns that may rearrange the order any day you look at it)? Is risk group 4 or 5 to be avoided or a risk group 1 to be picked over any? If so why? Etc.
Perhaps there is such a document there already and I have missed it.
The only relevant data in those tables for the point of this thread is the potential drawdown in this category to make them unsuitable for a conservative portfolio and hence the short term high yield as an alternative category to look at for diversification.
Ha! I think there is more relevance in these data than just MAXDD. I for one had not realized how well this category as a whole has performed. Until your post, never really considered it.