Bloomberg Intelligence on Cash ETFs
Bloomberg Intelligence posted an article entitled, "Cash Is King: 'Cash' Hoarding Grows to Record in ETFs as Distributions Rise." It explains, "Assets in cash-like ETFs have climbed to a record $87 billion after one their best months of flows. Cash alternatives like the SPDR Bloomberg 1-3 Month T-Bill ETF have outperformed 90% of all ETF strategies over the past 12 months, and increased distribution payouts are luring more investors deterred by equity-market volatility." (Note: Ultra-short "cash" ETFs will be a major topic at our upcoming Crane's Bond Fund Symposium, which takes place March 23-24, 2023, in Boston, Mass. Click here for details.) The piece tells us, "Assets in cash-like ETFs with a duration of one year or less have reached a new high of $87 billion, with inflows driven by volatile equity markets. Assets may stay elevated given higher yields than in the past. Positions tend to rise and fall based on the S&P 500's relationship to its 200-day moving average and overall market sentiment. Though the index is still above the 200-day threshold, assets in ultra-short cash-like ETFs have climbed, and a more sustained bull market may be needed to attract flows back into equities.... Allocating to ultra-short term bond ETFs has sheltered investors from market declines, with 90% of ETFs lagging behind the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) over the past 12 months -- the highest reading since 2018. The figure dipped below 10% in early 2021." Bloomberg says, "Fixed-income ETFs with the shortest duration accounted for one of the highest percentages of total ETF flows historically in February. The ultra-short category took in $9.5 billion, while the industry overall added just $7.7 billion due to widespread outflows.... Ultra-short ETFs, in addition to providing shelter from market volatility, have begun to pay out larger monthly distributions -- another reason why investors may be reluctant to pull money out of the category. Recent dividend payouts were the highest since we began tracking them in 2020. The group's average indicated yield is just over 3.5%."
