Ultra-Short Bond ETF Gets More Out of a Cash Position

With all the market ups and downs, financial advisors have been shifting in and out of cash to capture the prevailing risk-on and risk-off oscillations, and some turned to exchange traded fund cash alternatives as an easy way to park their money.

With all the market ups and downs, financial advisors have been shifting in and out of cash to capture the prevailing risk-on and risk-off oscillations, and some turned to exchange traded fund cash alternatives as an easy way to park their money.

At PGIM Investments, their first ETF, the PGIM Ultra Short Bond ETF (PULS A), helped meet the increased demand for ultra-short-duration debt exposure to allow fixed-income investors gather decent yields with minimal risk. PULS’s risk-managed and short duration approach is designed to provide investors a hedge against rising rates and enhance or diversify a cash management strategy.

“What we try to do in PULS is create a diversified, risk-managed framework to allocate to corporates as well as some structured products and commercial paper to generate a little bit of yield beyond a typical money market fund. So we’re trying to get a little bit more alpha in your portfolio for that cash or cash-like sleeve where we think there’s opportunity if you want to step a little bit out on the curve, step a little bit out of cash and stay in that short end,” Keshav Rajagopalan, Co-Head of Exchange Traded funds, PGIM, said at the Morningstar Investment Conference.

The fund is actively managed and competitively priced at 15 basis points, or 12 basis points lower than the average active ETF in its category. The active ETF also tries to generate a diversified source of alpha through high-quality positioning that covers consistent and sustainable sources across investment-grade sectors to help maintain stability of principal.

The ETF’s portfolio follows an ultra-short duration, risk-managed approach that helps fixed-income investors to hedge against rising rates while enhancing or diversifying a cash management strategy. When you look at this strategy, it’s not cash, but it must be close from a liquidity management and duration perspective, and that’s how they plan to manage it.

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