ETF Version of Money Market Funds Growing Fast
The closest thing to money market funds in the ETF space are ultra-short term bond ETFs. Like their mutual fund counterparts, these exchange-traded funds hold debt with maturities of one year or less.
There are around 32 of these ETFs listed in the U.S. today and they collectively have around $131 billion in assets under management.
That’s a fraction of the money invested in money market funds—$5.7 trillion, according to the Investment Company Institute—but assets are growing fast.
So far this year, $33 billion has flowed into ultra-short term bond ETFs, primarily those that invested in Treasury bills.
Top Ultra-Short Term Bond ETFs
The most popular funds in the category this year include the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) and the iShares 0-3 Month Treasury Bond ETF (SGOV), which have pulled in $12.7 billion and $10.6 billion of new money, respectively.
The US Treasury 3 Month Bill ETF (TBIL), a “single-bond ETF,” which invests in the most recently auctioned U.S. 3-month Treasury Bill, has also been popular among investors. It’s pulled in around $2.4 billion of fresh cash so far this year.
Each of these ETFs, along with the SPDR Bloomberg 3-12 Month T-Bill ETF (BILS) and the iShares Short Treasury Bond ETF (SHV)—the two ETFs which round the list of the five most popular ultra-short term bond ETFs this year—have delivered year-to-date gains of just over 4%.
The JPMorgan Ultra-Short Income ETF (JPST), which is the largest active ETF in the segment and the second-largest ultra-short term bond ETF overall with AUM of $23 billion, hasn’t been very popular this year. The fund registered outflows of nearly $800 million and it underperformed with a return of 3.8%.
Unlike the other ETFs mentioned so far, JPST takes on credit risk in an effort to generate higher yields. It’s a strategy that has historically delivered outperformance, but not this year.
