Money Market ETFs for Q4 2023

Money market exchange-traded funds (ETFs) have become a popular choice for investors seeking a blend of capital preservation and security, especially during periods of market volatility. These funds predominantly invest in high-quality and highly liquid short-term debt instruments, such as Treasury bonds and commercial paper. While they offer a shield against market turbulence, they typically don’t yield significant income.

Although the primary focus of most money market ETFs is on cash equivalents or debt instruments with short-term maturities, some might venture into longer-term or even lower-rated debt instruments, introducing a slightly higher risk level.

Key Takeaways:

• Money market ETFs are synonymous with safety, ensuring capital preservation during market upheavals.
• Their primary investments are in highly liquid short-term debt instruments and cash equivalents.
• Leading the pack of money market ETFs for Q4 2023 are CSHI, PULS, and YEAR.
• There are 35 such ETFs, focusing on ultra-short T-Bills and investment-grade bonds, excluding those with less than $50 million AUM.
• The S&P U.S. Ultra Short Treasury Bill & Bond Index, a reasonable benchmark for these funds, has returned 4.4% over the past year as of Sep. 27.

Detailed Overview of Top Money Market ETFs:

1. NEOS Enhanced Income Cash Alternative ETF (CSHI)
   • Performance Over 1 Year: 5.8%
   • Expense Ratio: 0.38%
   • Annual Dividend Yield: 5.30%
   • 30-Day Average Daily Volume: 55,469
   • Assets Under Management: $157.0 million
   • Inception Date: Aug. 29, 2022
   • Issuer: Neos Investments LLC
   • Description: CSHI primarily invests in 1-3 month Treasury Bills and employs put options to generate monthly income. This strategy makes it slightly riskier than other ultra-short bond funds. Its active management approach results in a higher expense ratio compared to other similar funds. The top holdings are T-Bills maturing in October and November 2023.
2. PGIM Ultra Short Bond ETF (PULS)
   • Performance Over 1 Year: 5.6%
   • Expense Ratio: 0.15%
   • Annual Dividend Yield: 4.71%
   • 30-Day Average Daily Volume: 1,012,297
   • Assets Under Management: $5.3 billion
   • Inception Date: April 5, 2018
   • Issuer: Prudential
   • Description: PULS is an actively managed fund aiming for a balance between current income and capital appreciation. It focuses on ultra-short duration bonds. Over 20% of its assets are in cash, corporate bonds, and asset-backed securities. Other significant holdings include bonds from Svenska Handelsbanken AB, MUFG Bank, Ltd., and Williams Companies Inc.
3. AB Ultra Short Income ETF (YEAR)
   • Performance Over 1 Year: 5.3%
   • Expense Ratio: 0.25%
   • Annual Dividend Yield: 4.38%
   • 30-Day Average Daily Volume: 91,903
   • Assets Under Management: $521.7 million
   • Inception Date: Sep. 14, 2022
   • Issuer: Equitable
   • Description: Similar to PULS, YEAR is actively managed, targeting both capital appreciation and current income. Most of its investments are in investment-grade debt with maturities under one year. It may diversify into corporate securities, Treasuries, repurchase agreements, and money-market funds. U.S. dollar and corporate bond holdings constitute about a quarter of its assets, followed by T-Bills and related government bonds maturing in 2024 and 2025.

4. iShares Ultra Short-Term Bond ETF (ICSH)
   • Description: The iShares Ultra Short-Term Bond ETF aims to provide current income consistent with the preservation of capital. It invests in a mix of U.S. investment-grade short-term bonds, including corporate and government bonds. The ETF is suitable for investors looking for an enhanced yield over traditional cash deposits while maintaining a low-risk profile.
   • Performance Over 1 Year: 4.9% (estimated)
   • Expense Ratio: 0.08%
   • Annual Dividend Yield: 4.20% (estimated)
   • 30-Day Average Daily Volume: 300,000 (estimated)
   • Assets Under Management: $2.5 billion (estimated)
   • Inception Date: November 2012
   • Issuer: BlackRock
5. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL)
   • Description: This ETF seeks to provide investment results that correspond to the price and yield performance of the Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index. It offers exposure to short-term U.S. Treasury securities and can be used as a cash alternative.
   • Performance Over 1 Year: 4.5% (estimated)
   • Expense Ratio: 0.14%
   • Annual Dividend Yield: 4.00% (estimated)
   • 30-Day Average Daily Volume: 250,000 (estimated)
   • Assets Under Management: $3 billion (estimated)
   • Inception Date: May 2007
   • Issuer: State Street Global Advisors

These ETFs are known for their stability and are commonly used by investors as cash alternatives or for short-term holdings. As always, it’s essential to conduct thorough research and consult with a financial advisor before making any investment decisions.