With short term interest rates off of their lows and moving higher, IndexIQ debuted its first ever short-duration bond ETF on Tuesday.
The launch of IQ Short Duration Enhanced Core Bond U.S. ETF (NYSE Arca: SDAG) further expands IndexIQ’s suite of factor-based fixed income ETFs.
SDAG seeks to outperform the short duration, U.S. dollar-denominated taxable fixed income universe by using a momentum tilted factor strategy.
Salvatore Bruno, Chief Investment Officer of IndexIQ, told ETF Trends that SDAG uses a momentum based approach to overweigh and underweigh sectors.
“Most other short duration bond ETFs use amount of debt outstanding to weight the underlying bonds and thus the sectors,” Bruno said. “With the potential to provide positive performance relative to the US taxable credit/government index while maintaining low duration impact, SDAG can be a core ETF holding in the short duration bond asset category.”
Bruno said there is renewed interest by investors in short duration fixed income as a way to earn a positive real return with minimal volatility.
“Given an uncertain outlook going forward, a more dynamic strategy may be an attractive way to access this important asset class,” he said.