Active Ultra Short Bond ETF Debuts

July 31, 2019

IndexIQ today rolled out an ETF that showcases its position as the subsidiary of a major financial company and the benefits that come with that. The IQ Ultra Short Duration ETF (ULTR) is an actively managed fund targeting a weighted average duration of one year or less, and is managed by subadvisor NYL Investors, with IndexIQ parent company New York Life Investment Management listed as the fund’s advisor.

The new fund comes with an expense ratio of 0.24% and lists on the NYSE Arca.

There are already nine actively managed ultra-short bond ETFs listed in the U.S., the largest of which is the $7.7 billion JPMorgan Ultra-Short Income ETF (JPST). However, IndexIQ Chief Investment Officer Sal Bruno points out that NYL Investors is a very experienced institutional asset manager, with roughly $250 billion in assets under management.

“One of the key differentiating features is going to be the real focus on risk control and price stability,” he said.

Investment Approach

ULTR primarily invests in investment-grade debt securities of all types. The fund can invest up to 20% of the fund’s assets in futures and options contracts, and can also invest in other ETFs and closed-end funds that target appropriate securities. The subadvisor will consider metrics like spread, duration, yield and liquidity when evaluating securities, the prospectus says.

According to a press release, the fund seeks to invest in higher quality debt, while seeking to maximize current income, and limit volatility and interest rate risk.

“It’s really the active management process leveraging that team with the huge investment management expertise within NYL where they do credit research, security selection and sector research to help minimize some of the potential downside in a disciplined risk control process,” Bruno added, noting that ULTR offers an option for investors looking to get added yield while not taking on excessive risk to do so.

Contact Heather Bell at [email protected]

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