Guggenheim Funds, which recently hired a veteran money market fund management team (see our "People" News below), is the latest entrant into the "enhanced cash" or ultra-short bond ETF space. A press release posted yesterday says, "Guggenheim Funds Distributors, Inc. announced the launch of two new actively managed exchange-traded funds (ETFs), the Guggenheim Enhanced Core Bond ETF (GIY) and the Guggenheim Ultra-Short Bond ETF (GSY). The two funds seek to offer the benefits of active management and a cost-effective way to access today's fixed income marketplace." (See also our April 26, 2011, Crane Data News "Oppenheimer Short Duration Fund Launches; Dreyfus Closes Enhanced".)
It says, "Guggenheim Enhanced Core Bond ETF is an actively managed ETF that seeks total return comprised of income and capital appreciation. The Fund will normally invest at least 80% of its net assets in fixed income securities and attempts to outperform the Barclays Capital U.S. Aggregate Bond index. The Investment Adviser utilizes a quantitative strategy which attempts to identify relative mispricing among the instruments of a given asset class and estimate future returns which may arise from the eventual correction of the relative mispricing. Guggenheim Enhanced Ultra-Short Bond ETF is an actively managed ETF that seeks maximum income, consistent with preservation of capital and daily liquidity. The Fund will normally invest at least 80% of its net assets in fixed income securities. The Fund uses a low duration strategy to seek to outperform the 1-3 Month Treasury Bill Index in addition to providing returns in excess of those available in U.S. Treasury bills, government repurchase agreements, and money market funds. The Fund is not a money market fund and thus does not seek to maintain a stable net asset value of $1.00 per share."
The new fund's website explains, "The Guggenheim Enhanced Ultra-Short Bond ETF (GSY), seeks maximum current income, consistent with preservation of capital and daily liquidity. The Fund will normally invest at least 80% of its net assets in fixed-income securities. The Fund uses a low duration strategy to seek to outperform the 1-3 month Treasury Bill Index in addition to providing returns in excess of those available in U.S. Treasury bills, government repurchase agreements, and money market funds, while seeking to provide preservation of capital and daily liquidity. The Fund is not a money market fund and thus does not seek to maintain a stable net asset value of $1.00 per share. The Fund expects, under normal circumstances, to hold a diversified portfolio of fixed-income instruments of varying maturities, but that have an average duration of less than 1 year."
See our April 2011 Money Fund Intelligence story, "Comeback or Flashback? Enhanced Cash Returns," which says, "Last year, Dreyfus, with its Institutional Income Advantage Fund (DLASX), and JPMorgan, with its JPMorgan Managed Income Fund (JMGSX) launched the first of the latest generation of products in the space just beyond money market funds. This past month, Fidelity launched its Conservative Income Bond Fund (FCNVX), and Oppenheimer has filed for a new Short Duration Fund. There remain, though, just a handful of large funds in the sector -- and they're pikers compared to the money fund arena. PIMCO's Enhanced Short Maturity Strategy Fund (MINT), which was launched in November 2009, is the only new fund that has seen real growth -- it recently broke above the $1 billion mark. But its yield indicates that it's beyond the realm of 'enhanced cash'. (MINT is yielding around 0.8% vs. 0.25% to 0.5% for most of the new breed of enhanced funds.)"
