Two BulletShares ETFs are seeing sizable flows as investors look for opportunities in the front end of the yield curve.
Many investors staying within the short to intermediate part of the curve, opting for balanced fixed income exposure as opposed to making big bets. Jason Bloom, Invesco’s head of fixed income and alternatives ETF Product Strategy, told VettaFi the front end of the curve is more favorable from a risk/reward perspective.
Longer durations offer little term premium when the yield curve is inverted. The back end of the curve currently means taking on more duration risk without being rewarded with meaningfully higher yields.
The $1.1 billion Invesco BulletShares 2025 High Yield Corporate Bond ETF (BSJP) has seen $350 million in one-week flows and $440 million in four-week flows. Year to date, BSJP has accreted $507 million in net flows.
Meanwhile, the $2 billion Invesco BulletShares 2026 Corporate Bond ETF (BSCQ) has taken in $37 million in one-week flows and $66 million in four-week flows. The fund has garnered $464 million year to date.
Why Invest in BulletShares ETFs Instead of Individual Bonds?
BulletShares ETFs offer the potential for monthly income and a cash distribution at the fund’s expected termination. BulletShares ETFs hold several potential advantages over a ladder of individual bonds for customized fixed income investing.
The BulletShares ETFs may offer greater control, diversification, and improved liquidity than a ladder of individual bonds. Bond portfolios tend to require a higher number of securities to maintain ideal diversification, which can be fairly cumbersome and time-consuming to trade, according to Invesco.
The flexibility component of BulletShares ETFs comes down to the scalability of the fund suite. Advisors can give their clients the same investment exposure at the exact same cost regardless of their size. This is very difficult to achieve using individual bonds, according to Invesco.
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