Principal launches ultra-short income ETF

Apr 27th, 2019 | By | Category: Fixed Income

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Iowa-headquartered Principal Financial has launched an actively managed fixed income ETF that provides exposure to high-quality bonds with low duration.

Principal launches ultra-short income ETF

The fund provides actively managed exposure to a portfolio of high-quality bonds with low duration.

The Principal Ultra-Short Active Income ETF (USI US) has listed on NYSE Arca and comes with an expense ratio of 0.18%.

The fund, which is benchmarked against the Bloomberg Barclays US 1-3 Month Treasury Bill Index, may invest in both fixed and floating rate securities that are rated investment grade by either S&P Dow Jones or Moody’s.

Eligible types of securities for the portfolio include US Treasuries, foreign government bonds, corporate securities, agency bonds, asset-backed securities, securitized products, and commercial paper. The fund will invest more than 25% of its assets in securities in the financial services (banking, insurance, and commercial finance) industry.

The fund will maintain an average effective maturity below three years and an average portfolio duration of less than one year.

Ultra-short bond strategies have been a popular choice for new ETF products recently as providers aim to meet demand from investors who are concerned about future interest rate increases.

Just last week, Goldman Sachs introduced the Goldman Sachs Access Ultra Short Bond ETF (GSST US) on Cboe BZX. The fund also maintains a portfolio duration of less than one year and invests in a range of US dollar-denominated securities rated investment grade. Its net expense ratio is 0.16%.

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