ETF Spotlight: Treasury Fund BOXX Ranks in Top 1% for Flows

ETF Spotlight: Treasury Fund BOXX Ranks in Top 1% for Flows

The fund uses derivative strategies to match the price and yields of 1-3 month U.S. Treasurys.

ETF.com
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Contributing Editor
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Reviewed by: etf.com Staff
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Edited by: Ron Day

The short-term U.S. Treasury-focused Alpha Architect 1-3 Month Box ETF (BOXX) has generated more than $2.3 billion in inflows this year to rank in the top 1% in this category. 

BOXX, which debuted just 18 months ago, has increased to more than $3 billion in assets under management. Its recent gains have dovetailed with a growing belief that the U.S. central bank will maintain interest rates at their current level—or take a more hawkish turn—and investors seek strategies for taking advantage of high yields in a low-risk, tax efficient way.  They have also come despite little improvement in share price. 

$BOXX is on fire, keeps making our 'Outliers' list of ETFs with flows way above their 12mo avg," wrote Bloomberg Intelligence ETF Senior ETF Analyst Eric Balchunas in a recent post on the social media platform Twitter/X.

BOXX was recently trading at slightly over $107 per share, roughly flat for the past 24 hours. It is up 2% in 2024, far surpassing iShares 20+ Year Treasury Bond ETF (TLT), which invests in long-term Treasurys and is down nearly 9% year-to-date, and slightly better than the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL), which is up a few fractions of a percentage point over the same period.

BOXX: Actively Managed Derivatives Strategy

Actively managed BOXX aims to match the price and yield performance of 1-3-month U.S. Treasury bills (minus fees and expenses) through the use of box spread derivative strategies. 

This strategy employs exchange-listed, FLEX options or both to construct box spreads to provide exposure to the short-term Treasurys. A box spread involves constructing synthetic long and short positions on an equity index such as the S&P 500. The difference between the strike prices on the long and short options positions represents the potential maximum value at expiration. 

The box spreads look to remove the equity index risk while locking in a maximum return. The quantity and expiration dates of the box spreads will be based on the size of the fund and effective yield for options. The fund typically invests 80% of its assets in box spreads with a weighted average maturity of less than 90 days. It may use European- and American-style assets, and the fund advisor has discretion to roll option positions. Investors may expect high turnover in the portfolio. 

Economic data this week could foreshadow a swing in the Federal Reserve's position on a rate decision that could affect investors' interest in short-term Treasurys. A report from the Bureau of Economic Analysis (BEA) revised Q1 real gross domestic product (GDP) growth to 1.3%, a lower figure than the first estimate of 1.6%. 

And the Cleveland Fed’s “Nowcast,” which follows a set of real-time estimates for various inflation metrics, currently predicts a monthly increase of 0.10% in the Personal Expenditures Index (PCE) for April, down from 0.3% in March, and a yearly increase of 2.7%. The BEA is scheduled to report PCE, the Fed's favored inflation measure, this Friday. 

James Rubin is a contributing editor for etf.com, where he produces the Morning Exchange and Weekly Exchange newsletters. A longtime financial writer, editor and book author, he formerly held positions as a news and markets editor for the Americas at CoinDesk, where he focussed on cryptocurrencies. 

He provided editorial guidance for a Wall Street Journal best-selling book on Bitcoin and oversaw a startup newsroom focused on digital financial assets. He has edited for TheStreet and Unchained, where he wrote daily news stories about the trial of fallen crypto entrepreneur Sam Bankman-Fried. His writing has also appeared in The Hollywood Reporter, Forbes.com, AdWeek, Bankrate, The Financial Brand and The Wall Street Journal. He has also written for Forbes Insights and the Economist Intelligence Unit, including papers presented at World Economic Forums in Davos and Mumbai. 

James is the co-author of The Urban Cyclist’s Survival Guide (Triumph Books) and has been interviewed about bike safety on a number of NPR affiliates. In a prior career, Rubin was a world-ranked tennis player, once competing in Wimbledon’s qualifying rounds. He speaks fluent German and is a graduate of the Columbia University Graduate School of Journalism and received his BA at Columbia University.