PGIM Ultra Short Bond ETF

PULS

Market cap $12.5B

Current market conditions reflect irrational exuberance, with surging valuations in stocks, precious metals, crypto, and collectibles reminiscent of past bubbles. Conflicting economic signals persist: inflation data is mixed, the labor market is weakening, but affluent consumer spending and bank lending remain resilient. Dividend growth investing remains my preferred strategy, with a focus on high-quality REITs, utilities, and my favorite cash equivalent ETF.

PULS ETF offers stable income with minimal duration risk, focusing on capital preservation and high liquidity for conservative investors. Active management and investment-grade bias allow PULS to adapt quickly to interest rate changes, maintaining attractive yields versus cash. Falling short-term forwards suggest yields will gradually normalize, but PULS remains resilient due to its ultra-short duration and flexible portfolio.

Last week, the iShares Flexible Income Active ETF (BINC) reached a significant milestone and became the latest member of the $10 billion of the active fixed income club. The exclusive club now has six members, fewer than half the number of active equity ETF members.

Mid-2025 is approaching, and exchange traded fund demand continues its robust growth. Last year was a landmark year for the ETF industry, with industry net inflows for the first time surpassing $1 trillion and one ETF exceeding $100 billion in net inflows.

PGIM Ultra Short Bond ETF is a diversified, ultrashort and short-duration bond strategy, providing investors with monthly income. The ETF is highly liquid and can potentially be utilized in place of money market funds. Interest rate cuts may pressure future yields as maturing bonds are replaced with lower-yielding assets, making long-duration bonds more attractive for income seekers.

Despite the ETF industry's passive roots, active has stolen the show. Active ETF assets just topped the $1 trillion threshold, making up nearly 10% of the total ETF pie.

After a record year for fixed income ETFs in 2024, demand has been even stronger to start 2025. U.S. listed fixed income ETFs pulled in $78 billion in the first two months.

The PGIM Ultra Short Bond ETF offers high income and capital preservation through short-duration exposure, investing in various non-government securities. PULS has low duration relative to its peers and has a diversified issuer portfolio, mitigating risk. Despite its credit risk exposure, PULS has outperformed numerous of its peers over the last five years, with an impressive yield and a low expense ratio of 0.15%.

The PGIM Ultra Short Bond ETF is downgraded to 'Hold' due to tight corporate spreads and a low risk premium. PULS holds highly rated bonds with a 0.2-year duration, primarily AA names, and offers a 4.8% 30-day SEC yield. Current corporate spreads are at decade lows, making PULS less attractive compared to alternatives like JAAA and UYLD.

Investors have been married to their money market funds for the better part of the last two years. But a recent poll from VettaFi's Q4 Fixed Income Symposium in October showed more market participants may finally be willing to break out of their comfort zones and redeploy those funds into riskier assets.