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State Street Global Advisors (SSgA) has launched the SPDR SSgA Ultra Short Term Bond ETF (ULST) on the NYSE Arca, providing investors with access to a diversified portfolio of ultra short-term bonds.
The current investment landscape of historically low interest rates has prompted many investors to re-evaluate their income and liquidity needs. In this environment the advantages of traditional cash vehicles are diminished and investors are seeking alternatives that may generate a higher total return while potentially offering similar stability.
Ultra-short bond products have been a major beneficiary of this environment, pulling in more than $9 billion in new flows so far this year. The new SPDR ETF is the latest entrant in this increasingly popular category.
Actively managed, the fund seeks to provide income, preservation of capital and daily liquidity by primarily investing in US dollar-denominated investment-grade bonds that are rated a minimum of A- or A3 and have an effective duration between three and nine months – slightly longer term securities than traditional cash vehicles.
Portfolio holdings will include a range of fixed and floating securities, including corporate obligations, government bonds, agency securities and ETFs.
The fund is benchmarked for performance measurement and guideline purposes against the Barclays US Treasury Bellwether 3 Months Index. This index tracks the performance and attributes of the on-the-run US Treasury that reflects the most recently issued three-month security.
Commenting on the launch, James Ross, senior managing director and global head of SPDR ETFs at SSgA, said: “The SPDR SSgA Ultra Short Term Bond ETF is an attractive option for the cash investor who is seeking incremental yield but does not want to sacrifice liquidity. We are seeing tremendous flows year to date in short and ultra short term bonds, as investors are increasingly anticipating rising interest rates.”
Steve Meier, SSgA’s chief investment officer of fixed income, cash and currency at SSgA, added: “As one of the world’s leading cash and high quality fixed income managers, our team has significant experience and a proven, disciplined approach to credit research. This gives us the latitude to exploit inefficiencies in the fixed income market allowing for opportunistic portfolio positioning.”
SSgA has more than 30 years of experience managing cash, with some $385 billion in global cash assets currently under management. Within the ETF space, SSgA manages more than $337 billion in SPDR-branded ETF assets worldwide and is one of the largest ETF providers globally.
The new fund has an expense ratio is 0.20 percent.