Money market exchange-traded fund’s (ETFs) invest in short-term, low-risk, interest-bearing securities like Treasury bills, investment grade bonds, and commercial paper. They are considered low risk, making them suitable investments to preserve capital and provide income during times of market uncertainty. Investors often use money market ETFs as a cash alternative because they offer a slightly higher return than traditional savings accounts while maintaining relatively low volatility and easy access to funds.
In 2023, money market funds saw steady inflows due to the Federal Reserve’s rate hikes which increased yields in fixed-income securities, making them more appealing than parking cash in a bank account where higher savings rates often took time to materialize. These funds also gained in popularity after several prominent regional banks failed early last year, prompting many investors to look for other safe investment alternatives amid concerns over bank runs at other smaller banks.
Key Takeaways
- Top money market ETFs for Q1 2024 include PULS, CSHI, and GSY.
- Money market ETFs are designed to preserve capital and provide income during times of market uncertainty.
- These funds primarily invest in highly liquid short-term debt instruments, such as Treasury Bills and investment grade corporate bonds.
Below, we present the top money market ETFs that have yielded the highest returns for investors over the past year (leaving aside leveraged and inverse ETFs, as well as those with less than $50 million in assets). For comparison, investors can use the S&P U.S. Ultra Short Treasury Bill & Bond Index as a benchmark for comparing performance to these three funds. All data is as of Dec. 15.
PGIM Ultra Short Bond ETF (PULS)
- Performance Over 1 Year: 6.23%
- Expense Ratio: 0.15%
- Annual Dividend Yield: 5.07%
- 30-Day Average Daily Volume: 1,133,438
- Assets Under Management: $5.81 billion
- Inception Date: April 5, 2018
- Issuer: Prudential
PULS seeks to follow the performance of the ICE 0-1 Year US Corporate & Government Index, a benchmark comprising of investment-grade fixed-income securities, targeting an effective duration of one year or less and a weighted average maturity of less than three years. The fund holds over 20% of its assets in cash, corporate bonds, and asset-backed securities. Other top holdings include Citigroup Inc. (C) bonds, RTX, corp. (RTX), and The Williams Companies, Inc. (WMB).
Neos Enhanced Income Cash Alternative ETF (CSHI)
- Performance Over 1 Year: 6.16%
- Expense Ratio: 0.38%
- Annual Dividend Yield: 6.07%
- 30-Day Average Daily Volume: 74,716
- Assets Under Management: $265.60 million
- Inception Date: Aug. 29, 2022
- Issuer: Neos Investments LLC
The ETF aims to distribute monthly income generated from investing in a portfolio of 1-3 month Treasury Bills through a U.S. large-cap put option strategy. It may also invest in forwards, options, futures contracts, or swap agreements related to these short-term bills to achieve its objective. CSHI’s top four holdings carry a cumulative portfolio weighting of nearly 60%, with maturity’s primarily in early 2024.
Invesco Ultra Short Duration ETF (GSY)
- Performance Over 1 Year: 5.92%
- Expense Ratio: 0.22%
- Annual Dividend Yield: 4.6%
- 30-Day Average Daily Volume: 683,699
- Assets Under Management: $1.83 billion
- Inception Date: Feb. 12, 2008
- Issuer: Invesco
The fund seeks to outperform the Barclays Capital 1-3 Month U.S. Treasury Bill Index by investing in a diverse portfolio of investment-grade securities with an average duration of less than one year. Aside from keeping 15% of its assets in cash, other key holdings in the ETF’s portfolio include a Japanese Treasury discount bill and corporate bonds issued by Marathon Oil Corporation (MRO), Mercedes-Benz Group AG (MBGAF), and NextEra Energy, Inc. (NEE).
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As of the date this article was written, the author does not own any of the above securities.
