IndexIQ launches active ultra-short bond ETF

Aug 1st, 2019 | By | Category: Fixed Income

IndexIQ, a subsidiary of New York Life Investment Management, has launched an actively managed fixed income ETF that provides exposure to an ultra-short duration portfolio of bonds from multiple sectors.

IndexIQ launches active ultra-short bond ETF

IndexIQ has listed the IQ Ultra Short Duration ETF (ULTR US) on NYSE Arca. (file image)

The IQ Ultra Short Duration ETF (ULTR US) has listed on NYSE Arca and comes with an expense ratio of 0.24%.

The fund seeks to provide current income while limiting price volatility.

Managed by NYL Investors, which oversees over $252 billion in assets, it will invest in a range of investment-grade securities including US Treasuries, agency securities, corporate bonds, asset-backed securities, mortgage-backed securities, commercial paper, debentures, floating-rate bonds, and convertible corporate bonds, as well as derivatives or other ETFs targeting these sectors.

The portfolio manager will consider many factors including spread, duration, yield, and liquidity when allocating amongst different sectors.

The aggregate duration of the portfolio will be kept below one year and the fund may invest up to 20% of its total assets in options and futures (including shorting US Treasury futures) to achieve this aim.

“This fund aims to provide investment solutions that generate consistent, risk-controlled excess returns for our clients,” said Kenneth Sommer, Senior Portfolio Manager at NYL Investments. “ULTR represents a strategy which helps mitigate interest rate risk while seeking to minimize price volatility. We believe this ETF can play an important role in managing client portfolios in any investment environment.”

“For the first time, our clients can access the markets through an ETF developed and run by the experienced institutional asset management team at NYL Investors,” added IndexIQ’s Chief Investment Officer, Salvatore Bruno. “Adding to our lineup of active managers on our IndexIQ platform is a testament to the capabilities of New York Life Investments and how we continue to bring innovative solutions to market.”

The fund will compete with a range of ultra-short bond ETFs available in the US. The largest are the $7.5 billion JPMorgan Ultra-Short Income ETF (JPST US) and the $3.0bn Goldman Sachs Access Treasury 0-1 Year ETF (GBIL US). These funds are also amongst the cheapest with expense ratios of 0.18% and 0.12%, respectively.

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