Ultrashort bond funds
A liquidity management strategy in any market environment.
STRATEGY
Ultrashort bond funds: An alternative to traditional cash management strategies
As an advisor, you know all too well the cost of clients having excess cash on the sidelines. The Federal Reserve reports that U.S. households have amassed $15 trillion across traditional savings vehicles and money market funds. What’s more, U.S. household cash makes up 14.5% of total financial assets.1
Helping your clients effectively manage their cash is a critical way to add more value. Ultrashort bond funds help put cash to work before it’s needed while also seeking to boost yield and mitigate risk. They’re well suited for clients seeking stability, flexibility, or income beyond what may be available in traditional cash vehicles.
Fixed income securities with maturities around one year can be a potentially more rewarding alternative to cash for your clients and, ultimately, your practice. Our portfolio experts have crafted several use cases, detailed below, followed by ways that you can use Vanguard’s institutional quality funds to optimize client liquidity management.
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USE Cases
Pursue yields competitive to money markets, with low volatility
Ultrashort ETFs can give your clients' portfolios returns that are competitive with money markets but with liquidity benefits, too. They offer strong yields because they are often comprised of 0-to-3 month or 1-year Treasury bills, whose yields historically have been competitive with money markets and higher than short-term CD and savings rates, as this next chart shows. Short-term Treasury indexes also have historically stable price records, which can help deliver stable NAV in indexed Ultrashort funds (see VBIL chart further down this page.) And because they are ETFs, they can also offer greater day-to-day liquidity.
Competing yields on different savings vehicles:
Notes: The Fund is not a money market fund and is not subject to the strict rules that govern the quality, maturity, liquidity, and other features of securities that money market funds may purchase. The Fund’s investments may be more susceptible than a money market fund is to interest rate risk, which is the chance bond prices overall will decline because of rising interest rates, and credit risk, which is the chance a bond issuer will fail to pay interest and principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that bond to decline. The Fund does not seek to maintain a stable net asset value of $1.00 per share.
Sources: Savings and CD rates are from the Federal Deposit Insurance Corp. (FDIC) as of December 15, 2025; money market rates from the Securities and Exchange Commission as of December 31, 2025; T-bill rates from Bloomberg, as of December 31, 2025.
Boost practice management with this alternative to rolling Treasuries
Many clients want their advisor to shield their short-term cash investments from potential losses. Advisors often accomplish this by rolling Treasuries. However, ultrashort bond funds can deliver similar benefits with lower volatility without the need to constantly manage a rolling Treasury sleeve. Rolling your clients’ short-term cash needs in and out of one fund that essentially resembles a rolling Treasury strategy requires much less effort. This strategy frees you up to perform higher-value work for your clients, like financial planning, wealth management, and active management of asset class exposures that are more complex. In short, ultrashort bond funds can help add value to your practice and your clients’ portfolios.
An ultrashort bond ETF is an efficient tool
Enhance or replace bond ladders for precision and flexibility
Integrate ultrashort bond ETFs to inject liquidity into bond ladders. Such a fund can serve as a sweep account feeding various client investing needs and strategies.
Sweep income generated by coupons and bond maturities into an ultrashort ETF. Portfolios may benefit from potentially higher yields than a money market. Plus, they can provide continued market exposure without sacrificing liquidity as you assess your next move. You may siphon some of that into the purchase of new ladder positions, or into a core bond ETF to enhance diversification of the ladder, or as cash payments to meet client obligations. You’ll enhance portfolio efficiency and demonstrate proactive value to your clients.
Ultrashort funds can also serve to replace bond ladders entirely when paired with short-term bond ETFs. Using this strategy, advisors can invest in a more diversified portfolio of bonds, at a much lower cost. Plus, this strategy is more liquid—making it easier to adjust to unexpected needs—than bonds.
You can build liquidity into portfolios with bond ETFs
How this works in practice
This 2-minute video shows how to divide client expenses into tiers and move their liquid assets from fund to fund in short-dated bond ETFs instead of traditional bank accounts, CDs, or money market funds.
fund lineup
Explore Vanguard’s ultrashort lineup
Liquidity, low volatility, and cost are factors to consider when looking at ultrashort fixed income solutions. Vanguard’s ultrashort lineup—VUSB, VBIL, VGUS—offer institutional quality. Our expert team of fund managers, analysts, and traders combine disciplined risk management with global market insights. Our Fixed Income Group aims to deliver historically high performance, such as consistent outperformance for active funds like VUSB and razor-sharp benchmark tracking for index funds like VBIL and VGUS.
VUSB
Our actively-managed Ultra-short Bond ETF is designed to offer liquidity, limited volatility, and greater return potential than government securities alone—all at a low cost. Benefits include:
· Low expense ratio of 0.10%.
· High-quality, short-term securities, including investment-grade credit, to help provide stability and less sensitivity to interest rate fluctuations.
· Targets a duration closer to 1 year with exposure between 0 and 2 years.
· Managed by our world-class active team in Vanguard Fixed Income Group.
VBIL
Our 0–3 Month Treasury Bill ETF is passively managed to offer timely liquidity and low expense ratios. Benefits include:
· Low expense ratio of 0.06%.
· Low volatility from high-quality, short-term government securities to help provide stability and less sensitivity to interest rate fluctuations.
· Tracks the Bloomberg U.S. Treasury Bills 0–3 Months Index with a sole focus on U.S. Treasury bills.
· Its benchmark has posted a decline on only nine of the 2,023 trading days since January 2018 and recovered initial value, on average within three days following each decline.
VBIL’s benchmark: Few declines, speedy recoveries in price
The performance data shown represent past performance, which is not a guarantee of future results. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.
Source: Daily returns obtained via Vanguard, based on the Bloomberg U.S. Treasury Bill 0–3 Months Index, starting from the earliest available data in January 2018. Data as of December 31, 2025.
VGUS
Our Ultra-short Treasury ETF is passively managed for near-term liquidity needs with a low expense ratio. Benefits include:
· Low expense ratio of 0.07%.
· High-quality, short-term Treasury bonds to help provide stability and less sensitivity to interest rate fluctuations.
· Tracks the Bloomberg Short Treasury Index, which includes U.S. Treasury bills, notes, and bonds under 12 months to maturity.
Resources
Portfolio Analytics Tool
Stress-test client portfolio scenarios and action plans with on-demand diagnostics of portfolio risk and return drivers.
Bond Duration Tool
Fine tune fixed income portfolios by discovering the ideal duration exposure for each client.
Smart, repeatable strategies
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