Investors looking for alternatives to traditional cash instruments can pick from a number of exchange traded funds featuring high-grade, low duration U.S. government debt. An increasingly popular ETF in this corner of the bond space is also fairly new.
The Goldman Sachs Treasury Access 0-1 Year ETF (NYSEArca:GBIL) debuted in September and has recently a big influx of investor assets.
GBIL looks to reflect the performance of the Citi US Treasury 0-1 Year Composite Select Index, which is comprised of U.S. Treasury Obligations with a maximum remaining maturity of 12 months. U.S. Treasury obligations refer to securities issued by the U.S. Treasury where payment of principal and interest is backed by the U.S. government. The fund h as an effective duration of 0.40 year.
“To be fair, GBIL debuted in September, so it is around 10 months old. Still, a 10-month-old ETF with assets under management of over $635 million is noteworthy. GBIL has swelled in size thanks to a recent spate of inflows,” reports Investopedia.
GBIL holds 13 Treasury securities and has an effective duration of just 0.37 years. Duration measures a bond’s sensitivity to interest rate changes.
The ETF is also the first to offer same-day settlement of creations and redemptions in the short-term U.S. Treasury market, according to Goldman Sachs. GBIL allows liquidity providers or so-called authorized participants to create or redeem shares and settle within hours instead of days.
“This innovation adds to the standard intraday trading ease of ETFs and can therefore broaden the range of investment applications,” according to Goldman Sachs.
GBIL is part of Goldman’s growing suite of fixed income ETFs, which recently added the smart beta Goldman Sachs Access Investment Grade Corporate Bond ETF (NYSEArca:GIGB). GIGB comes with a 0.14% expense ratio.
GIGB tracks the Citi Goldman Sachs Investment Grade Corporate Bond Index and only holds bonds with at least one year to maturity and a minimum rating of BBB-. GIGB also applies a fundamental screen to measure issuers by operating margin and leverage.
For more on fixed income ETFs, visit our Fixed Income category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.