Tuesday 16 February 2021

London's High Yield Fixed-Income ETFs

There are over 150 fixed income ETFs trading on London Stock Exchange markets,  reaching far afield, offering exposure to emerging markets as well as sovereign debt in Europe, the US and established Asian Pacific regions, corporates and money markets. But how to find one that suits your needs?

I'm looking for a good diversification of ETFs, by 'flavour' (dividend or fixed-income), geographical region and currency. So I'll try to identify the following options in the two main flavours:
  • UK
  • Europe/Euro
  • US
  • Emerging Markets
  • Asia Pacific - with or without Japan.
I'm also on the lookout for income-oriented ETFs for individual countries - but these seem to be in short supply on the London market. I don't invest outside the London market because of potential tax and currency complications; the ETFs must also be suitable for ISAs and SIPPs - which is not always the case.

Finally, I'm looking for 'distribution' ETFs - I like to have cash flowing into my account, so that I can re-invest the money in new ideas.

Twenty20 offer an ETF search tool that provides a selection of 18 'High Yield' ETFs quoted in London - a useful starting point. Many of the ETF are quoted in two currencies - I usually choose the £ Sterling flavour, although I'm not sure it makes a lot of difference. 

The list includes some I already own:
  • iShares Short Duration High Yield Corporate Bond UCITS (SDHG) - yield 5.2%
  • iShares Euro High Yield Corporate Bond UCITS ETF (SHYG) - yield 5.1%
  • iShares Global High Yield Corp Bond UCITS ETF (IGHY) - yield 4.8%
  • iShares $ High Yield Corporate Bond UCITS ETF (SHYU) - yield 5.4%

There are also similar Lyxor, SPDR and PIMCO ETFs on offer as well as 'hedged' products - but these don't attract me so much as the iShares offerings.

What did not show up on this list are two other similar ETFs I also own:
  • SPDR Bloomberg Barclay Emerging Markets Local Bond ETF (EMDD) - yield 3.9% (maybe not qualifying as 'high' yield)
  • iShares J.P. Morgan Emerging Markets Local Govt Bond UCITS ETF (SEML) - yield 5.3%

Other ETFs not included are:
  • Vanguard USD Emerging Markets Government Bond UCITS ETF (VEMT) - yield 4.4%
  • Vanguard USD Corporate Bond UCITS ETF (VUCP) - yield 2.9%

justETF also have an ETF screener, although not specifically for the London market. The search identifies 28 ETFs quoted in £ Sterling. If any catch your fancy you will have to do more research.

AJBell have an ETF screener that allows you to specify London and a wide range of 'Morningstar Catgories; for example, GBP Bond (9), Asia Bond (1), EUR Corporate Bond (17), Global Bond (12) etc. Again, you will have to track down more details on any that look interesting to make sure they are suitable.

The Financial Times has an ETF screener that offers a 'Fixed Income' option - but I can't find a way to specify the London market.

So, the conclusion of this little exercise is that finding the right ETF is fairly difficult. For some reason none of the UK-oriented screeners are easy to use for finding appropriate fixed-income (or dividend) ETFs. Hopefully you can look at my selections and extend your research from there.

I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

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