EDV is an ETF that holds only zero-coupon STRIPS (principal strips), which are long-term US Treasury securities whose interest payments have been separated from the principal. It pays no interest. Instead, it buys at a discount and receives face value at maturity, giving it an effective duration of about 25 years.

It suits pension funds and institutional investors who want to hedge against falling interest rates or deflation, or who want to match long-term liabilities with assets.

It is a passively managed (index-tracking) ETF that Vanguard launched in 2007.

The ETF holds US Treasury STRIPS with 20 to 30 years to maturity, weighted by equal par value, to achieve an ultra-long duration. Because there is no interest, returns come purely from price changes, and the fund seeks far larger price gains than TLT or VGLT when interest rates fall.

• An effective duration of about 25 years gives much higher interest rate sensitivity than ordinary long-term Treasury ETFs such as TLT, VGLT, and SPTL
• The zero-coupon structure removes reinvestment risk and keeps duration steady
• Vanguard's extremely low expense ratio keeps the cost burden to a minimum

Assets under management (AUM) are $3.9B, and the expense ratio is 0.05% per year.

Among long-term Treasury ETFs such as TLT, VGLT, SPTL, and TLH, EDV has one of the highest effective durations. TLT holds ordinary Treasuries with maturities of 20 years or more, which pay coupons, so its duration is lower than that of EDV. VGLT and SPTL are long-term Treasury ETFs with low expense ratios, but their durations are also shorter than that of EDV. ZROZ is a zero-coupon ETF holding maturities of 25 years or more and is similar to EDV, but its AUM is smaller. TLH holds 10 to 20 year maturities and has lower interest rate sensitivity than EDV. EDV suits investors who want large Treasury price gains without leverage when interest rates fall.

As discussion of peak interest rates continues, demand for bets on falling rates has flowed intermittently into ultra-long Treasury ETFs, and EDV is widely used by institutional investors thanks to its higher liquidity compared with ZROZ.

When recession fears or expectations of Federal Reserve rate cuts grow, some investors who want a higher duration than TLT or VGLT tend to shift to EDV or ZROZ.

EDV is a specialist ETF that gives investors seeking a hedge against falling rates or deflation, or matching of ultra-long liabilities, low-cost exposure to Treasuries with a duration of about 25 years.

If you want ultra-long Treasury exposure but prefer coupon income over what EDV offers, consider TLT, VGLT, or SPTL. Comparing costs and liquidity with ZROZ, which follows a similar zero-coupon strategy, is also useful. For intermediate Treasuries with 10 to 20 years to maturity, TLH is an alternative that maintains long-term Treasury exposure while reducing interest rate sensitivity.

EDV is designed for investors who want to hedge against falling interest rates or match ultra-long liabilities. Add it to a portfolio only after fully understanding the interest rate sensitivity of a duration of about 25 years.

When interest rates rise, the duration of about 25 years can cause far larger price declines than TLT or VGLT. Because it pays no interest, there is no income cushion even if rates stay elevated for a long time, so it is best approached with a clear hedging purpose rather than for short-term trading.

EDV is a specialist ultra-long hedging tool that provides US Treasury exposure with a duration of about 25 years at a low cost. Choose it after comparing it with TLT and VGLT, whether for bets on falling rates or for matching pension liabilities.