SGOV Nears $100 Billion, a First for Ultra-Short Bond ETFs

The iShares 0-3 Month Treasury Bond ETF (SGOV) is closing in on $100 billion in assets, a level no ultra-short-term bond ETF has reached.

The fund holds $97.9 billion after pulling in $28.9 billion in net inflows this year, making it the largest fund in its category and the third-largest U.S.-listed fixed-income ETF overall, behind only the $160 billion Vanguard Total Bond Market ETF (BND) and the $139 billion iShares Core U.S. Aggregate Bond ETF (AGG).

And it may not stop at third. With nearly $8 trillion parked in money market funds, and SGOV pulling in cash far faster than BND or AGG, it's likely only a matter of time before it becomes the largest bond ETF of any kind.

What SGOV Is

ETFs like SGOV are alternatives to money market funds—ultra-safe places to park cash and earn interest with almost no interest-rate risk. SGOV carries a 30-day SEC yield of 3.6% and charges 0.09%.

The next-biggest fund in the category is the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL), with $46.6 billion in assets and a 0.14% expense ratio. 

The Vanguard 0-3 Month Treasury Bill ETF (VBIL), which launched last year and undercuts both on cost at 0.06%, has grown fast to nearly $10 billion.

No Interest Rate Risk

The appeal of these ETFs stem from what they avoid: interest rate risk. With bond yields climbing, SGOV's near-zero duration has kept it insulated from the price declines hitting longer-dated Treasurys (bond prices and yields move inversely). 

SGOV is up 1.9% year to date, versus a 0.5% gain for the iShares 1-3 Year Treasury Bond ETF (SHY) and losses of 1.1% and 1.4% for the iShares 7-10 Year Treasury Bond ETF (IEF) and iShares 20+ Year Treasury Bond ETF (TLT), respectively.