A Comparison Of Ultra-Short Duration Bond ETFs

by: Steven M. Williams


With the Fed currently raising interest rates, one may look into ultra short term bonds to park extra cash.

Ultra short term bond ETFs usually have a duration of less than 1.

Some ultra short term bonds may include a small part of the portfolio in high yield bonds to increase yield.

Ultra short term bonds allow you to park your cash, and maximise capital preservation while allowing you to make a small return compared to cash.

It may be good to have a small allocation in ultra short term bonds to cushion against equity downturns or rising interest rates, while still generating yield.

Since 1987, American investors have held 24% of their portfolio in cash, according to the American Association of Individual Investors (AAII) Asset Allocation Survey (sourced from PIMCO). This can lower portfolio returns over time and has a large opportunity cost - since 2008, real yields on cash have been negative. One may consider putting some money in ultra short duration bond ETFs which can provide a better yield than cash while only adding a small amount of risk compared to cash, and have a much lower volatility and duration risk compared to mid/long term bonds, especially given that rates are set to rise.pimco-cashyield

(Chart from Pimco's literature on the PIMCO Enhanced Short Maturity Strategy ETF (NYSEARCA:MINT))

I'll be going over some of the top ultra short term bond ETFs.


30d-SEC Yield



Credit Rating Maturity

iShares Ultrashort Duration Bond ETF (BATS:NEAR)






ABS: 30.30%

Fin: 29.52%

Indust: 25.68%

CMBS: 3.86%

Agency: 2.78%

Utility: 1.39%

PassThru MBS: 0.16%

Cash/Derivs: 6.31%

Total: 343 holdings


AA: 5.96%

A: 26.15%

BBB: 26.78%

Cash/Derivs: 6.31

Uses median with 3 ratings, or lowest with 2.

Avg: 1.49y

0-1y: 29.11%

1-2y: 34.99%

2-3y: 26.15%

3-5y: 3.36%

Cash/Derivs: 6.31%

SPDR Barclays 1-3 Month T-Bill ETF (NYSEARCA:BIL)



0.11y T-Bils: 100% AA+:100%

Avg: 0.11y

0-3m: 100%

PIMCO Enhanced Short Maturity Strategy ETF






IG Credit: 55.09%

Mortgage: 18.53%

Emerging Markets: 4.99%

Other: 8.94%

Net Other Short Instruments (IG, duration < 1y): 12.44%

Total Holdings: 678

Government: 9.08%

AAA: 8.46%

AA: 7.87%

A: 21.47%

BBB: 34.14

BB: 0.07%


A2: 5.73%

A3: 4.13%

S&P ratings

Avg: 0.37y

0-1y: 90%

1-3y: 10%

Guggenheim Enhanced Short Duration ETF (NYSE:GSY)






No breakdown given.

Primarily invests in IG USD corporate bonds, treasuries, and money market instruments. May invest in floating rate.

Up to 10% in junk bonds

No limit on foreign USD-denominated bonds, including Emerging Markets.

Up to 10% in non USD bonds

Up to 20% in MBS or ABS

Up to 25% in muni bonds

Total Holdings: 205

AAA: 7.2%

AA: 13.35%

A: 16.44%

BBB: 8.81%

BB: 2.34%

B: 0.45%

CCC: 0.17%

Cash/Equivs: 47.66%

NR: 3.58%

Ratings calculated by ETF's management - uses highest

Avg: 1.26y

No breakdown given.

iShares Ultra Short-Term Bond ETF (BATS:ICSH)






Fin: 26.91%

Indust: 19.02%

ABS: 0.04%

Cash/Derivs: 54.02%

Total: 52 holdings

AAA: 0.04%

AA: 12.90%

A: 26.18%

BBB: 6.85%

Cash/Derivs: 54.02%

Uses median when 3 ratings, lowest when 2

Avg: 0.89y

0-1y: 15.08%

1-2y: 10.46%

2-3y: 20.43%

Cash/Derivs: 54.02%

Table created by myself based on data from each of the ETF's sites as well as prospectuses.

Chart NEAR Total Return Price data by YCharts

Chart MINT Standard Deviation of Monthly Price Returns (5Y Lookback) data by YCharts

As you can see, from the total return chart, ultra short term bonds did not return much over the past 4 years, with the highest, GSY, having a 5.17% total return, but they have remained relatively stable over time. Ultra-short term bond ETFs have returned more than cash however.

Some ETFs invest solely in government securities, such as BIL. Others like NEAR, ICSH, MINT, and GSY are actively managed. All ETFs have had very low 5-year volatility as shown in the above chart, with BIL having the lowest at 0.3%, and ICSH having the highest at 0.16%.

SPDR Bloomberg Barclays 1-3 month T-Bill ETF (BIL)

BIL has had the lowest return among all these ETFs at a total return of 0.17% over the past 4 years and has stayed flat. That's because it only invests in treasury ETFs with a maturity of 1-3 months. It has a duration of 0.11. These are generally regarded as virtually "risk-free", therefore do not come with a high return. It has an SEC 30-day yield of 0.76%.


(above image sourced from BIL's web page)

iShares offers two different short-duration ETFs, the iShares Short Maturity Bond ETF and iShares Ultra-Short Term Bond ETF, but what's the difference between them?

iShares Short Maturity Bond ETF (NEAR)portfolio-data

(All images used for NEAR are sourced from the ETF's webpage)

NEAR holds bonds with a maturity of 0-3 years, and a small holding in bonds with a maturity of 3-5 years (3.21% of portfolio). However, it offers a duration of only 0.57 years. It invests in investment-grade bonds, floating and fixed rate, with a credit rating of BBB- or higher. It holds 343 holdings and has $2.579B in assets under management. It has a 30 day SEC yield of 1.52%.

It invests in asset backed securities, financial bonds, industrial bonds, as well as small holdings in mortgage bonds and agency bonds and money market instruments.

Near-Sector near-maturity



Top Ten Issuers: 15.55%

Full holdings are available on ETF's webpage.

iShares Ultra-Short Term Bond ETF (ICSH)

In contrast to NEAR, ICSH invests over half (54%) of its portfolio in cash and money market instruments. The rest is investment grade bonds with a maturity of fewer than 3 years. However it only has 52 holdings compared to NEAR. It offers a lower duration at 0.33 years compared to NEAR's 0.57 years. The 30 Day SEC Yield is 1.47%, compared to 1.52% for NEAR. The MER is much lower than NEAR, at 0.08% vs 0.25%. It is the smallest fund out of the ones being looked at having only $122M assets under management.

(All images used for ICSH are sourced from the ETF's webpage)


icsh-sector icsh-credit

icsh-topissuers Top Ten Issuers: 27.46%

Full holdings are available on ETF's webpage.

Guggenhelm Ultra Short Duration ETF (GSY)

GSY selects its holdings based on a quantitative and qualitiative analysis, and holdings are reviewed by the fund's legal team. It has no limits on international USD denominated holdings, other than a general limit of up to 10% junk bonds, which could add diversification. It has an SEC yield of 1.21%.

It has a duration of 0.15 years.

It has an average maturity of 1.26 years.

The ETF produces it's holdings chart based on the highest rating and converts it into the equivalent S&P rating, which is in contrast to the median rating when 3 ratings exist, or lowest rating if 2 ratings exist that the iShares ETF's use. This might have been decided arbitrarily, or it might have been decided to inflate the ratings profile of the ETF. This is just something to note and you may want to do your own analysis on this.

Maturity break downs are not given. Holdings sectors/types are not given either. You may manually compute it by looking at the holdings, which is something that you may want to do on your own before investing in it. This article is only meant to be a brief overview/comparison.

gsy-info gsy-ratings


Note: The holdings above are the top holdings, and are not the top issuers which is what's shown for the iShares ETF.

(All images used for GSY are from the ETF's webpage)

You may view the full holdings at its webpage.

PIMCO Enhanced Short Maturity Active ETF (MINT)

The vast majority of MINT's assets are in holdings with a maturity of less than 1 year (90%). It also has holdings from all around the world in mostly other developed nations which would help diversify risk in case there is a financial crisis specific to the US. It has 678 holdings. Virtually all holdings are in investment grade quality. It is the largest ultra short duration ETF, having $7.2B in assets. It has an SEC Yield of 1.51%.

It has a duration 0.36y and an effective maturity of 0.37y (the lowest other than BIL which has an average maturity of 0.11 years).




You can also view Moody's and Fitch ratings on the holdings webpage.


Full holdings are available on ETF's webpage.

So in summary, there are many ultra-short duration ETFs, many are essentially variations of each other - in maturity, credit quality, geographic exposure, etc. MINT is by far the largest fund so that's important to make sure that the fund will last and that there shouldn't be any liquidity problems. I also like how MINT seems to display the most information about its holdings in its webpage using simple charts, although with all ETFs you'd be able to see the full holdings.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.