On this episode of the “ETF of the Week” podcast, VettaFi’s head of research, Todd Rosenbluth, discussed the NEOS Enhanced Income 1-3 Month T-Bill ETF (CSHI ) with Chuck Jaffe of Money Life. The pair discussed several topics related to the ETF, in order to give investors a deeper understanding of it.Chuck Jaffe: One fund, on point for today, and the expert to talk about it. This is the ETF of the Week!
Yep, welcome to the ETF of the Week, where we examine trending, new, newsworthy, unique, and intriguing exchange-traded funds with Todd Rosenbluth, the head of research at VettaFi. And at VettaFi.com, you’ll find all the tools and research that you need to be a savvy and smart investor in ETFs.
Todd Rosenbluth, great to chat with you again!
Todd Rosenbluth: It’s great to be back, Chuck!
Chuck Jaffe: Your ETF of the Week is…
Todd Rosenbluth: The NEOS Enhanced Income 1-3 Month T-Bill ETF, CSHI.
Chuck Jaffe: CSHI. The NEOS Enhanced Income 1-3 Month T-Bill ETF. This is a really interesting fund, and I know that a lot of people think that NEOS and some of the things they do are all new and fresh out of the box. But this fund has been around for a while. It’s got a track record, but short-term treasuries… Why now?
Todd Rosenbluth: So, there’s a number of things. One, let’s state upfront: NEOS, we’ve talked about them beforehand. They offer covered call ETFs, tax-efficient income. They’re the experts in that space. It’s all they do, and they’ve had a lot of success. The market is going to see more volatility over the summer. There’s a lot of uncertainty based on the next move for the Fed.
We’ve seen investors gravitate towards short-term bond funds during times of that volatility. What makes this fund from NEOS, CSHI, interesting to me is its above-average yield. It uses options tied to those T-bills to get an above-average income stream. We think that investors are going to continue to look towards it.
It’s already popular, you’re right. It’s been around for more than three years. It has a Morningstar track record and $1 billion in assets. So, it’s not just the equity strategies from NEOS that are having success. It’s this fixed-income product as well.
Chuck Jaffe: The other thing is that in its history — and by the way, it’s got a four-star rating from Morningstar, as long as you mentioned that it’s got that rating — but in its history, when its peer group does worse, it tends to do better. And that’s what we’ve seen this year, where it’s in the top of its peer group, etc.
And we’re not necessarily at a spot where we’re expecting short-term T-bills to do quite as well as they’ve done in the last few years.
Todd Rosenbluth: You’re right. I mean, so a couple of things there. One, when I looked — and by the time people are listening to this, it might have changed — but CSHI was in the number two ranking in terms of Morningstar’s category, which is just impressive. There’s not a lot of delta that’s likely to happen with short-term bond funds.
In fact, that’s the point. The point is that it doesn’t — you don’t have a whole lot of movement. It’s cash-like in its characteristics. So, to get 100 basis points more of income — the distribution yield is 4.7% at the end of April, as I’m talking about this and looking at the data right now — that’s impressive. So, you are able to get above-average income with a very low-risk strategy.
That’s compelling.
Chuck Jaffe: Yeah. And we should point out, by the way, that April data is the most current that’s available as we are recording this at the end of May. It does raise a different issue, because if somebody is looking for safety, you could have picked a whole bunch of T-bill funds that don’t have the options overlay, which would be earning that full one percentage point less.
But again, you’re going into T-bills for ultimate safety. So, is there a worry? Is there any sort of thing where you go, ‘Okay, there’s a risk here’ that you need to be aware of that could occur with an option strategy that wouldn’t if this was just a straight, ordinary, ‘I only buy T-bills’ kind of fund?
Todd Rosenbluth: I think there’s always a risk in investing. I think there’s very low risk, because the underlying securities here are one- to three-month T-bills. So, it’s using that and then using an options overlay as part, and doing so in a tax-efficient manner. So, I think you might be safer if you were just in cash.
You might be safer if you were just in pure T-bills, and you can do that for less than the 38 basis point fee. What I find is that people are often hiding out in cash, and they’re not getting as much of the income generation that they might think that they’re going to get, because cash doesn’t yield the way that it used to, because of interest rate cuts that we’ve had over the last couple of years.
So, if you’re looking to earn a little bit more, this is a good way of doing so. It isn’t going to move that much more or less than if you were investing in a pure T-bill product. I think it’s worth — I think it’s worth the reward if you’re interested in getting a little bit more income.
Chuck Jaffe: Yeah. And I mean, it’s more than covered that expense ratio in terms of what it’s delivered just from a yield standpoint. There’s been some appreciation on it as well, though that could change given what we’re seeing happening in the bond market these days. But if nothing else, if somebody has a big slug of money in cash and wants to still play for safety, this is a very small step up the risk scale. Diversify your cash, right?
Todd Rosenbluth: Exactly. So, I again, this still would fall under the relatively safe part of your portfolio. So, within fixed income, people might even have a safer part of the fixed-income allocation, and I think this can be a good substitute for some of that. Maybe not all of it, because you want to still be in cash, and fees matter.
But I’m looking again at NEOS’s website, and this is data as of the end of April, you are getting 70 basis points of stronger performance in the last three years using this NEOS ETF.
Chuck Jaffe: Well, the other thing is that this has been a consistent performer. If you look at the really short stuff — which I know you don’t, but if you looked at what was happening — you know, we’ve seen rates in the bond market getting whipsawed a little bit because we’ve gone from this environment where everyone was expecting the Fed’s bias to be towards cutting, etc., and then it became, ‘No, hold it, it’s going to wind up being towards raising.’
And we’ve seen a lot of whipsaw in the bond market, but this has been pretty steady and stable in the middle of all of that, too. So, that’s another reason to be like, ‘Okay, if the bond market is scaring you, shorten your durations and look for how you can goose your income.’
Todd Rosenbluth: That’s a great point, too. So, this could allow you to reduce your interest rate sensitivity by focusing on the shortest part of the fixed-income exposure.
Chuck Jaffe: I almost always ask you about how a fund should be used, or how you think a fund should be used. In this case, you can see both use cases. You can see the ‘Park your cash here, you’re going to get a little bit of goose on your yield, go for that.’ You could also say, ‘Hey, make this a place that you’re making a longer-term allocation to treasuries, keeping short-term, being ultra-safe.’ Right? Like, this can wear both hats?
Todd Rosenbluth: Exactly! So, if you’re nervous about the market heading into the summer, this can be a good strategy. If you want to have a permanent, recurring allocation to cash-like investments, this can also serve the purpose.
Chuck Jaffe: So, it is CSHI, the NEOS Enhanced Income 1 to 3 Month T-Bill ETF, ETF of the Week from Todd Rosenbluth at VettaFi. Todd, great stuff. We’ll see you again next week!
Todd Rosenbluth: Thanks a lot, Chuck.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yes, I am Chuck Jaffe. You can read all about my weekday podcast by going to MoneyLifeShow.com, or by searching for it wherever you find your favorite podcasts.
If you want more details on your favorite ETFs, or maybe your next favorite ETF, go to VettaFi.com, where you can dig into the funds we talk about and the things in your portfolio. And they’ve got a full suite of tools that’ll help you. They’re on X, they are @Vetta_Fi, and Todd Rosenbluth, their head of research, my guest, he’s on X, too, at @ToddRosenbluth
The ETF of the Week is here for you every Thursday. Make sure you don’t miss an episode by following along on your favorite podcast app, and we’ll be back next week to introduce you to another ETF. Until then, happy investing, everybody!
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Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.
