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Thesis
This year has proven to be a very tough one for many asset classes, including short-term bond funds. So far, we have the following tally in the markets:
The S&P 500 is down -10% this
VRIG: A Bit Disappointing (Rating Downgrade)
Summary
- This year has been challenging for asset classes, with the S&P 500 down 10%, Nasdaq down 13%, and short-term bond funds also affected.
- The Invesco Variable Rate Investment Grade ETF experienced a surprising -0.46% drawdown, despite its low portfolio duration of 0.22 years.
- VRIG's underperformance is attributed to slippage in the 'Securitized' bucket, particularly in ABS deals, despite strong credit ratings and low duration.
- Investors favor short-dated bond funds like VRIG for enhanced yield over treasury funds, though recent market stress has tested their resilience.
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Analyst’s Disclosure:I/we have a beneficial long position in the shares of VRIG either through stock ownership, options, or other derivatives. 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.
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