ETF Version of Money Market Funds Growing Fast

‘BIL’ and ‘SGOV’ are the two most popular funds in the ultra-short segment this year.

sumit
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Reviewed by: etf.com Staff
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Edited by: Kent Thune

The closest thing to money market funds in the ETF space are ultra-short term bond ETFs. Like their mutual fund counterparts, these exchange-traded funds hold debt with maturities of one year or less. 

There are around 32 of these ETFs listed in the U.S. today and they collectively have around $131 billion in assets under management.  

That’s a fraction of the money invested in money market funds—$5.7 trillion, according to the Investment Company Institute—but assets are growing fast.  

So far this year, $33 billion has flowed into ultra-short term bond ETFs, primarily those that invested in Treasury bills.

Top Ultra-Short Term Bond ETFs

The most popular funds in the category this year include the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) and the iShares 0-3 Month Treasury Bond ETF (SGOV), which have pulled in $12.7 billion and $10.6 billion of new money, respectively. 

The US Treasury 3 Month Bill ETF (TBIL), a “single-bond ETF,” which invests in the most recently auctioned U.S. 3-month Treasury Bill, has also been popular among investors. It’s pulled in around $2.4 billion of fresh cash so far this year. 

Each of these ETFs, along with the SPDR Bloomberg 3-12 Month T-Bill ETF (BILS) and the iShares Short Treasury Bond ETF (SHV)—the two ETFs which round the list of the five most popular ultra-short term bond ETFs this year—have delivered year-to-date gains of just over 4%. 

The JPMorgan Ultra-Short Income ETF (JPST), which is the largest active ETF in the segment and the second-largest ultra-short term bond ETF overall with AUM of $23 billion, hasn’t been very popular this year. The fund registered outflows of nearly $800 million and it underperformed with a return of 3.8%. 

Unlike the other ETFs mentioned so far, JPST takes on credit risk in an effort to generate higher yields. It’s a strategy that has historically delivered outperformance, but not this year. 

Sumit Roy is the senior ETF analyst for etf.com, where he's worked for 12 years. Before joining the company, Roy was the managing editor and commodities analyst for Hard Assets Investor. He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing pickleball and snowboarding.