Prudential enters the ETF arena with ultra-short bond fund

Apr 11th, 2018 | By | Category: ETF and Index News

Prudential Global Investment Management (PGIM) has brought its first ETF to market with the launch of the PGIM Ultra Short Bond ETF (PULS US) on NYSE Arca.

Stuart Parker, president and CEO of PGIM Investments.

Stuart Parker, president and CEO of PGIM Investments.

PULS is an actively managed fund which provides exposure to a diversified portfolio of ultra-short fixed income securities. The fund, which seeks to outperform the ICE BofAML USD Libor 3 Month Index, will invest primarily in investment grade, US dollar-denominated short-term fixed, variable and floating-rate debt instruments from US issuers.

Its risk-managed and short duration approach is designed to help investors hedge against rising rates and enhance or diversify a cash management strategy.

“Investors are using a variety of investment vehicles to meet their needs,” said Stuart Parker, president and CEO of PGIM Investments. “The actively managed ETF market, while small, has seen steady growth. Entering this market is a natural next step to expand our product range.”

PULS is sub-advised by PGIM Fixed Income, one of the largest global fixed income managers in the world, with more than $700 billion in assets under management as of the start of 2018.

“We are very excited to launch our first active ETF fund and firmly believe that actively managed funds will be an important part of the ETF market going forward,” said Michael Lillard, head of PGIM fixed income and chief investment officer.

PGIM will be hoping to replicate the success of the PIMCO Enhanced Short Maturity Active ETF (MINT US) which follows a similar strategy and has grown its assets under management to over $8.8 billion. MINT also invests in ultra-short, investment grade fixed income securities but has a slightly wider scope in that it may select bonds from any issuer globally.

PULS will be able to compete on price with a significantly lower expense ratio of 0.15% compared to MINT’s 0.36%. The true success of an active ETF, however, is its ability to outperform its benchmark – MINT has been successful in this regard, returning 1.13% per annum over the past five years compared to 0.31% for the FTSE 3-Month Treasury Bill Index over the same period. Time will tell whether PULS can deliver similarly impressive returns.

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