Top Money Market ETFs for Q4 2023 (2024)

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Money market exchange-traded funds (ETFs) provide access to the fixed income space and offer the opportunity for capital preservation and security even during market turbulence. These funds typically invest in high-quality and highly liquid short-term debt instruments including Treasury bonds and commercial paper. In exchange for their security, they also do not provide significant income for investors.

Although most money market ETFs invest primarily in cash equivalents or debt instruments with very short-term maturities, some may also invest in longer-term or even lower-rated debt instruments. In these cases, these securities constitute a somewhat higher level of risk.

There are 35 money market ETFs focused on ultra-short T-Bills and investment grade bonds, excluding those with under $50 million in assets under management (AUM). For comparison, a reasonable benchmark for this collection of funds is the S&P U.S. Ultra Short Treasury Bill & Bond Index, which has returned 4.4% in the last year as of Sep. 27.

Below, we take a closer look at the top three money market ETFs for the final quarter of 2023. All data below are as of Sep. 26, 2023.

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

CSHI invests in a portfolio of 1-3 month Treasury Bills and also uses put options to achieve monthly income distribution. The use of put options makes this fund slightly more risky than similar ultra-short bond funds. Additionally, as an actively managed fund, CSHI has a higher expense ratio than many other money market-like funds. The top holdings of CSHI include T-Bills with maturities in October and November 2023.

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

PULS is an actively managed fund seeking a balance of current income and capital appreciation. It targets a portfolio of ultra-short duration bonds. The fund carries more than 20% of its total assets as cash, corporate bonds, and asset-backed securities. The other top holdings include bonds by Svenska Handelsbanken AB, MUFG Bank, Ltd., and Williams Companies Inc.

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

Like PULS above, YEAR is an actively managed fund seeking to achieve both capital appreciation and current income, as well as liquidity regardless of the external market. Most of the fund's investments are in investment-grade debt with maturities of under one year. The fund may invest in corporate securities, Treasuries, repurchase agreements, and money-market funds, among other products. U.S. dollar and corporate bond holdings account for about a quarter of YEAR's assets, followed by T-Bills and related government bonds with maturities in 2024 and 2025.

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As of the date this article was written, the author does not own any of the above ETFs.

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