Invesco PowerShares has debuted an ultra-short-term Treasury bond exchange traded fund that catered toward investors in need of posting collateral or a safe haven to park their cash.
On Thursday, PowerShares rolled out the PowerShares Treasury Collateral Portfolio (NYSEArca: CLTL). CLTL has a 0.08% total expense ratio.
Institutional investors may utilize the ETF as an alternative to clients who need to post collateral to meet margin requirements or non-margin collateral, according to a press release. On the other hand, retail investors may see CLTL as a low-cost option to access safe-haven Treasuries with ultra-short durations.
“As an ETF leader, we’re always looking for new solutions to help institutional and retail clients navigate the evolving macro and regulatory environment,” Dan Draper, Global Head of PowerShares by Invesco, said in a note. “Money market reform will have an impact on US investors going forward, so we’re introducing this Treasury collateral ETF to help ease certain challenges on deck for our clients.”
For instance, in attempt to obviate another debacle in money market funds after the financial downturn, the Securities and Exchange Commission is expected to implement a round of new rules that could change the way the $2.7 trillion money market works, which could potentially trigger billions in outflows from these traditionally safe investments and opening up opportunities in cash-alternatives like ultra-short-duration bond ETFs, like CLTL.
The new bond ETF will try to reflect the performance of the ICE U.S. Treasury Short Bond Index, which is comprised of U.S. Treasury obligations with a maximum remaining term to maturity of 12 months. While the ETF may act as a cash alternative, CLTL is not a money market fund and does not maintain a stable asset value.
The underlying index excludes inflation-linked securities, floating rate notes, cash management bills, and any government agency debt issued with or without a government guarantee.
CLTL will be directly competing against he iShares Short Treasury Bond ETF (NYSEArca: SHV), which also tracks the same ICE U.S. Treasury Short Bond Index that serves as the underlying index for the new PowerShares ETF. However, CLTL comes with a more competitive 0.08% expense ratio, compared to SHV’s 0.15% expense ratio.
For more information on new fund products, visit our new ETFs category.