Goldman Sachs launches ultra short-term Treasuries ETF

Sep 16th, 2016 | By | Category: Fixed Income

Goldman Sachs Asset Management (GSAM) has launched its first fixed income exchange-traded fund, the Goldman Sachs TreasuryAccess 0-1 Year ETF (NYSE Arca: GBIL), providing exposure to the short-term US Treasury market.

Goldman Sachs debuts first fixed income Treasuries ETF

The Goldman Sachs TreasuryAccess 0-1 Year ETF (NYSE Arca: GBIL) tracks the performance of Treasuries with a maximum remaining maturity of one year.

According to GSAM, investors stand to benefit from the intraday tradability of the ETF structure which allows them to avoid the operational and pricing complexities of US Treasury Auctions and over-the-counter market.

In addition, the provision of same-day creation and redemption capability offers the potential for faster access to liquidity. This enhances the versatility of the fund, offering a wider range of potential applications for investors who may need more timely access to cash.

Michael Crinieri, GSAM’s Global Head of ETF Strategies, commented: “The bond trading environment has become more complicated. We wanted our first fixed-income ETF to provide investors a low cost way to obtain the credit quality and income they look for in the Treasury markets, but with greater transparency and ease of use.”

The fund tracks the Citi US Treasury 0-1 Year Composite Select Index, an index measuring the performance of Treasury securities (Treasury notes, bills and floating rate bonds backed by the full faith and credit of the US government) with a maximum remaining maturity of one year.

“Investors continue to seek opportunities to capture specific sectors in their portfolios in the most effective way,” added Arom Pathammavong, Global Head of Citi Fixed Income Indices. “We are pleased to have worked with GSAM to develop a short-term Treasury index that has been used to bring this innovative ETF to market.”

As of 16 September 2016, the index tracks 10 issues and has an effective duration and weighted average maturity of 0.38 years.

“We believe ETFs will continue to become a preferred vehicle for Treasury investing given the unprecedented level of demand for Treasuries as a result of recent regulation,” added Christina Kopec, Head of Product Strategy for Global Fixed Income at GSAM.

The ETF has a total expense ratio (TER) of 0.14%, slightly below the current average fund fee of 0.15% for an ETF using the Morningstar US ETF Short Government Category.

The ETF will be jointly managed by GSAM’s Liquidity Solutions team and its Quantitative Investment Strategies team. The Liquidity Solutions team has managed money market and short-duration strategies since 1988 and has over $350 billion under management globally. The Quantitative Investment Strategies team was founded in 1989 and manages over $83 billion globally.

GSAM entered the ETF space as an independent issuer in September 2015 with the launch of the Goldman Sachs ActiveBeta US Large Cap Equity ETF (NYSE Arca: GSLC). Since then the firm has rolled out a total of five “ActiveBeta” ETFs tracking in-house smart beta indices offering systematic multi-factor exposure to well-established drivers of long-term outperformance. These funds provide targeted access to the US, global ex-US, Europe, Japan and emerging markets. As of 2 September 2016 the suite has reached $2.3bn in assets under management.

In the US, the fund will compete against several other ultra-short duration ETFs, the largest of which is the Pimco Enhanced Short Maturity Active ETF (NYSE: MINT). This fund is actively managed, seeking greater income and total return than money market funds. It has current assets under management of $4.9bn and a TER of 0.35%.

Another is the iShares Short Treasury Bond ETF (NYSE: SHV), tracking the ICE US Treasury Short Bond Index. This fund perhaps provides the closest exposure to the new GSAM product by also investing solely in US Treasuries with a maximum maturity of 1 year. It has AUM of $3.3bn and a TER of 0.15%.

Investors seeking even shorter average duration exposure may consider the SPDR Barclays 1-3 Month T-Bill ETF (NYSE: BIL) which tracks the Barclays 1-3 Month US Treasury Bill Index. This has AUM of $1.6bn and a TER of 0.136%.

European domiciled investors have fewer ETF options in the segment. One such option, however, is from Pimco. It teamed with London-based ETF issuer Source to bring a UCITS-compliant version of MINT to Europe: the PIMCO US Dollar Short Maturity Source UCITS ETF (LON: MINT). This fund has $1.7bn in assets, is actively managed and has a TER of 0.35%.

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