## [# BOXX ETF Doubles in Size as Investors Chase Tax-Efficient Yield](/sections/features/boxx-etf-doubles-size-investors-chase-tax-efficient-yield)
# BOXX ETF Doubles in Size as Investors Chase Tax-Efficient Yield
Investors are pouring billions into an ETF that turns interest income into capital gains.
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[By Sumit Roy ](/authors/sumit-roy)
Nov 11, 2025
Edited by: ETF.com Staff
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The [**Alpha Architect 1–3 Month Box ETF (BOXX)**](/boxx) is having a breakout year. The fund has attracted $4.1 billion in inflows since January, nearly doubling its assets under management to $8.8 billion.
That makes BOXX one of the year’s biggest success stories among short-term income ETFs, a segment that’s seen explosive demand as investors park cash in vehicles yielding north of 4%.
## Turning Interest Into Capital Gains
BOXX’s appeal comes from an unusual strategy. The fund uses box spreads, which are paired options positions that effectively mimic lending at a fixed rate, to generate a return similar to Treasury bills. The difference is in how that return is taxed.
Instead of paying out interest income like a money market fund or a typical ultra-short-term bond ETF, BOXX reinvests the income it earns. As a result, investors don’t receive distributions; the fund’s net asset value rises instead. When investors eventually sell their shares, the gain is treated as a capital gain rather than ordinary income.
That distinction can be significant. Long-term capital gains are taxed at a maximum federal rate of 20%, versus 37% for ordinary income. The ability to defer taxes indefinitely and potentially pay a lower rate later is what’s driving much of the fund’s popularity.
Tax experts, however, have described this as a form of tax arbitrage that exploits a gray area in the code. The Urban-Brookings Tax Policy Center’s Steve Rosenthal has argued that box-spread income shouldn’t be treated as capital gains and that regulators may eventually close the loophole. For now, though, BOXX remains fully compliant under current rules.
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## Demand for Short-Term Income
The rise of BOXX mirrors a broader surge in short-term income ETFs. The [**iShares 0–3 Month Treasury Bond ETF (SGOV)**](/sgov) has pulled in $31 billion this year, while the [**SPDR Bloomberg 1–3 Month T-Bill ETF (BIL)**](/bil) has added $7 billion. SGOV now manages $61 billion, compared to BIL’s $43 billion.
BOXX is smaller than both but it's growing quickly. Its 3.68% total return this year is in line with SGOV’s, and since its late-2022 debut, BOXX has returned 14.61%, nearly matching SGOV’s 14.79%.
BOXX charges an expense ratio of 0.25%, compared to 0.09% for SGOV and 0.14% for BIL.
While BOXX’s box-spread positions are considered ultra-low risk, they aren’t government-backed like T-bills. The positions are guaranteed by the Options Clearing Corporation, which is designated as a “systemically important financial market utility” by U.S. regulators.
BOXX offers a novel way to earn near-risk-free yields with potential tax benefits, but the strategy’s long-term viability will depend on whether regulators take issue with how its income is classified.
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[ Sumit Roy Senior ETF Analyst ](/authors/sumit-roy)
Sumit Roy is the senior ETF analyst for etf.com and author of (Don't) Invest Like a Pro. He creates a variety of content for the platform, including… [View Bio](/authors/sumit-roy)
Related Topics [Fixed Income](http://www.etf.com/topics/fixed-income)
[Bond](http://www.etf.com/topics/bond)
[Ultra-Short Term](http://www.etf.com/topics/ultra-short-term)