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Post by steadyeddy on Jun 18, 2023 0:01:33 GMT
anitya, I think the reason for cash is maturing bonds held in the fund and there is no point buying new bonds with only 6 months left in the term prior to fund liquidation. I suspect the same issue will occur with other sponsors that offer target date bond ETFs.
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Post by yogibearbull on Jun 18, 2023 1:33:06 GMT
From prospectus, www.ishares.com/us/products/312444/ishares-ibonds-dec-2023-term-treasury-etf-fund"(pg S-3, S-4 and repeated elsewhere too)...In the last months of operation, as the bonds held by the Fund mature, the proceeds will not be reinvested by the Fund in bonds but instead will be held in cash and cash equivalents. To the extent that the Fund invests in money market or similar funds, it will incur the fees and expenses of such funds. By December 15, 2023, the Underlying Index is expected to consist almost entirely of cash earned in this manner. On or around this date, the Fund will wind up and terminate, and its net assets will be distributed to then-current shareholders pursuant to a plan of liquidation." So, basically, in the last few months, one paying fund ER just for holding m-mkt fund that has its own ER (may be unlisted internal or or listed institutional). IBTD started out in 02/2020 and will terminate in 12/2023. I don't see the value in holding it near its termination date.
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Post by anitya on Jun 18, 2023 8:11:30 GMT
No, I was not looking to buy IBTD but may be IBTF or IBTG but I looked at IBTD to figure out how sloppily (staggered) bonds mature in the final year. Right now MM rates are better than 2 yr rates but imagine we get to 2025-26 and MM rates could be abysmal. So much cash could be a drag on the yet unknown YTM of this product. If I am buying a Dec 2025 fund, I want the final YTM comparable to that of Treasuries of that maturity currently available in the market, minus ER and may be nominal liquidation costs.
I do not get why any institutional investor bothers with this to go thru the creation and redemption process.
P.S.: I knew about staggered maturity in the terminal year for target date corporate and Muni ETFs and the potential cash drag on those but I hoped it would be different for target date Treasury ETFs because the Treasury market is so much bigger for the single rating it has. I had looked at the other two categories a few years ago and decided not to buy them for the potential cash drag. It is possible others have figured out too and is why the AUM in IBTH through IBTM are minuscule.
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Post by anitya on Jun 18, 2023 20:34:30 GMT
In my search for target date Treasury ETFs, I stumbled on these guys - bondbloxxetf.com/products/ They do not have target date ETFs but have offerings based on Duration, credit rating (quality), etc.
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