It invests mainly in US dollar-denominated, floating-rate, investment-grade corporate bonds and minimizes the risk of price declines caused by interest rate changes (duration). Unlike fixed-rate bonds, its structure means that when market rates rise, interest income rises along with them.

It suits conservative investors who want to defend against falling bond prices in a rising-rate environment while still earning a higher yield than simply holding cash.

Invesco launched this actively managed ETF in 2016.

Active managers analyze corporate credit quality and the outlook for market interest rates to select securities. A substantial portion of the portfolio is allocated to investment-grade assets, but the fund may invest a limited share in below-investment-grade bonds to enhance yield.

• Flexible security rotation and improved yield efficiency through active management
• Exposure to a variety of asset classes, including asset-backed securities (ABS) as well as corporate bonds

Assets under management (AUM) stand at $2.0B, and the expense ratio is 0.30% per year.

Compared with longer-term bond products such as IUSB and BNDX shown in the table, VRIG has the advantage that its floating-rate feature keeps the risk of price declines very low even when interest rates rise.

When the rate-hike stance strengthens, interest income is reflected immediately, and the fund shows strong resilience relative to the market. On the other hand, in stable periods when rates fall sharply, there may be fewer opportunities for capital gains than with fixed-rate bonds.

Demand tends to concentrate on managing short-term funds stably when uncertainty about the peak in rates is high. In particular, the fund competes with ultra-short-term bond alternatives such as MINT, and inflows follow that pattern.

The fund effectively controls interest rate risk while aiming for returns above cash, but investors should consider active management costs and the risk of credit downgrades.

BINC and PYLD shown in the table are active alternatives that invest in a broader range of multi-sector bonds. If you want pure investment-grade floating-rate exposure only, FLOT, a low-cost index product, is a good fit. For more conservative cash management, you can consider MINT or NEAR. If extreme safety is the priority, Treasury-based products such as SHV or BIL are a good choice.

This is a checklist of key items to confirm before investing in VRIG. It is advisable to decide your allocation by considering how floating-rate products work and your own investment horizon, which can help improve the stability of your portfolio.

Even with an ultra-short-term bond strategy, temporary price declines can occur during a market liquidity crisis, and because of its floating-rate nature, there is a risk that income will decline when rates fall.

It is a suitable product for investors who want to protect their portfolio from interest rate volatility while earning better returns than cash. Its refined security selection, built on the skill of active managers, stands out as a short- to medium-term asset allocation tool.