This ETF offers targeted exposure to a corner of the bond market that features a significant amount of credit risk but very little interest rate risk. As such, SJNK might not be all that useful in a long-term portfolio but can be used as a tactical tool to fine tune fixed income exposure quite nicely. This ETF becomes particularly useful for investors looking to enhance current returns but concerned about the impact of rising interest rates on bond valuations. The focus on lower quality bonds delivers a significant amount of credit risk (and, therefore, the associated returns) while the focus on the short end of the maturity spectrum limits the sensitivity to changes in interest rates.
Most of the other ETFs in the High Yield Bonds ETFdb Category focus on longer-term debt, and as such may be more sensitive to changes in interest rate risk. SJNK can be expected to deliver lower yields than broad-based funds such as HYG and JNK, but could perform better when rates climb or when the longer-term economic forecast deteriorates. For investors looking to beef up current returns, SJNK is yet another tool in the toolbox.