SHV: A Safe Haven for Low-Risk Investment and Cash Management Tool | Moomoo Research

In the unpredictable financial market, finding an investment tool that can provide stable returns and effectively hedge market volatility has become a dream for many investors. Especially in the current situation where interest rates fluctuate frequently and economic uncertainty increases, how to properly manage the liquid funds in hand to make them safe and produce reasonable returns has become a topic worth in-depth discussion. This article will take you to understand an exchange-traded fund (ETF) focusing on short-term U.S. Treasury bonds - iShares Short Treasury Bond ETF (hereinafter referred to as SHV), and explore its unique charm as a cash management tool and risk-avoiding asset.

Whether you are a risk-averse investor looking for a financial haven or a financial expert looking for a short-term fund placement solution, SHV may become a choice worth paying attention to. Next, we will analyze this financial product from the investment objectives and strategies of SHV to its actual operation performance, providing a comprehensive analysis for you.

The investment objective of SHV is to pursue investment returns consistent with its benchmark index - the ICE U.S. Treasury Short Bond Index - by investing in U.S. Treasury bonds with a remaining term of one year or less. The fund mainly achieves its investment objectives in the following ways:

Invest in short-term Treasury bonds: The main holdings are short-term U.S. Treasury bonds with a term of one year or less.

Diversified investment: Invest in short-term Treasury bonds with different maturities to reduce the reinvestment risk brought by a single debt maturity date.

Liquidity management: Maintain high liquidity assets to ensure that investors can buy and sell ETF shares at any time.

iShares Short Treasury Bond ETF (SHV) is an exchange-traded fund (ETF) focusing on short-term U.S. Treasury bonds. The fund mainly invests in U.S. Treasury bonds with a remaining term of no more than one year. It is clear that the returns of SHV are highly linked to the U.S. benchmark interest rate. Once the risk-free interest rate decreases, the yield of SHV will drop sharply. We have found that in the low-interest-rate environment, the returns of SHV are very low.

From the introduction of SHV, it is only a good cash management tool and risk-avoiding asset in a high-interest-rate environment. It tracks the performance of the ICE Short U.S. Treasury Securities Index, investing at least 80% of its assets in the constituent assets of the index, and at least 90% of its assets in U.S. Treasury bonds.

Duration is an indicator of the sensitivity of bond prices to market interest rate changes. It quantifies the weighted average time length of bond cash flows, which can be used to predict the value changes of bond portfolios when interest rates change. Taking the duration of SHV at about 0.31 years as an example, if the market interest rate drops by 1%, the net asset value (NAV) of SHV may theoretically increase by about 0.31%, and SHV's reaction to interest rate changes is relatively mild. Compared with TLT, the elasticity is much weaker.

Source: SHV Website

As of August 28, the asset type of SHV is mainly cash and bonds, with cash accounting for 59.35% and bonds accounting for 40.65%; SHV's holdings are mainly U.S. Treasury bonds that will mature in a few months, of which the Treasury bonds maturing in 3-6 months account for 79.41%, and those maturing in 6-12 months account for 20.59%.

The interest rate risk of short-term Treasury bonds is relatively low and is less affected by interest rate cuts, providing a more complete choice. It should be noted that the fund will also re-hold new Treasury bonds when the current short-term Treasury bonds mature.

SHV's TTM dividend rate is 5.14%, and the dividend frequency is once a month, so it can obtain a relatively stable dividend under the expectation of interest rate cuts.

The latest dividend is $0.4879 per share, and the specific dividend situation can be viewed on Moomoo:

Advantages: SHV invests in U.S. Treasury bonds, with low interest rates and credit risks, and lower volatility can serve as a financial haven during market turmoil.

Disadvantages: The potential return is relatively low and cannot bring significant capital appreciation to investors.

Generally speaking, SHV is more suitable for risk-averse investors. The impact of interest rate cuts on SHV is not significant because the sensitivity of short-term bonds to interest rates is relatively low. In times of economic uncertainty, for investors who are unwilling to take high risks, SHV provides a relatively safe investment option; it can also be used as a temporary storage place for short-term funds and can obtain certain returns.

In addition to SHV, we have also selected some short-term bond ETFs of the same type:

Source: Moomoo Research