Market Overview

A Boring ETF Continues To Shine

A Boring ETF Continues To Shine

In the world of investments, there are occasions when boring and modest are positive descriptors. These days, securities with those labels are likely to be sought after by skittish investors.

The Invesco Treasury Collateral ETF (NYSE: CLTL) is almost certainly boring and its year-to-date performance is undoubtedly modest, but those are positives for this fixed income exchange traded fund.

What Happened

While stocks rallied again Thursday, just five ETFs hit all-time highs. None were equity-based strategies, but CLTL was a member of that quintet, extending its year-to-date gain to a modest 0.17 percent.

CLTL is also an example of a “right here, right now” ETF, meaning the fund is potentially attractive and useful for fixed income investors looking to manage rate risk at a time when interest rates are rising. CLTL, which turns two years old next month, has a modified duration of just 0.35 years.

Why It's Important

CLTL targets the ICE U.S. Treasury Short Bond Index. That benchmark “measures the performance of US Treasury Obligations with a maximum remaining term to maturity of 12 month,” according to Invesco.

As Invesco notes, CLTL is not a money market fund. Rather, the ETF holds 80 T-bills and related Treasuries at weights ranging from 0.20 percent to 3.81 percent. All of the fund's holdings have maturities of one year or less.

CLTL's diminished sensitivity to rising interest rates partially explains investors' enthusiasm for the fund as short-term bond ETFs have been among this year's most prolific asset gatherers in the fixed income space. The trade off with lower rate risk is usually a lower yield. CLTL has a strip yield of 1.55 percent, according to issuer data.

What's Next

Low yield or not, investors are displaying some enthusiasm for CLTL. Over the past year, the fund has seen inflows of almost $92 million, a decent percentage of its nearly $545 million in assets under management, according to issuer data.

Another selling point: CLTL is cheap. The fund's annual fee is just 0.08 percent, or $8 on a $10,000 investment.

Related Links:

This Year's Best ETFs

Adventure In A Boring Sector

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