Investors poured more than $23 billion into short-term bond ETFs last year.
U.S. fixed-income ETFs attracted a modest $9.58 billion in fresh net assets in 2013—or roughly a fifth of the inflows the asset class saw a year earlier in 2012—but that’s not to say that demand for fixed-income exposure was muted across the board.
On the contrary, investors piled into U.S. short-dated bond ETFs in the face of a steep yield curve and prospects for higher interest rates ahead. The Federal Reserve’s announced tapering of its monthly bond purchases beginning this month has already pushed yields on the 10-year Treasurys to 3 percent. The higher rates weigh most heavily on longer-dated debt.
In all, investors poured more than $23 billion into ETFs tapping into U.S. short-term debt, including investment-grade and high-yield government and corporate bonds in the zero- to five-year-term range, according to data compiled by IndexUniverse.
That pocket of the market today consists of nearly 40 funds, seven of which saw net inflows of more than $1 billion each in 2013.
Following are the seven most-popular short-term bond strategies of 2013, in ascending order:
SCPB tracks a market-value-weighted index of fixed-rate investment-grade nonconvertible U.S. corporate bonds with one to three years remaining in maturity, at one of the lowest price tags in the segment. It costs 0.12 percent in expense ratio a year, or $12 per $10,000 invested.
With a weighted average maturity for all securities in the portfolio of two years, the fund is serving up yield to maturity of 1.10 percent. That’s the weighted average yield if all securities in the portfolio were held to maturity.
The portfolio is nearly evenly split between allocations to financial and industrial names, each sector comprising roughly 47 of the overall mix. Utilities round out the sector exposure.
In 2013, SCPB saw total returns of 1.32 percent.