Investors Revisit SDSI ETF for Income and Liquidity

American Century’s Short Duration Strategic Income ETF (SDSI) has drawn renewed attention as 10-year Treasury yields remain elevated and the Federal Reserve appears unlikely to cut rates this year. The fund’s option-adjusted duration is 2.12 years and its 30-day SEC yield is 4.86%.

SDSI is an actively managed ETF that will turn four years old in October. The fund holds about 416 bonds and seeks to outperform the Bloomberg U.S. 1–3 Year Government/Credit Bond index.

The fund’s weighted average coupon is 5.17% and its expense ratio is 0.32%, equivalent to $32 on a $10,000 investment. Short duration reduces price sensitivity to interest-rate moves. As an ETF, SDSI offers daily liquidity.

Portfolio allocations show more than 18% in U.S. government securities and roughly 27% of holdings rated AAA, AA or A. The fund also includes lower-rated securities to pursue additional yield.

Amy Arnott of Morningstar noted, “The main advantage of short-term bonds is their ability to generate current income with relatively low risk.” She added, “In practice, this means that short-term bonds have generated relatively low returns-but they also court less volatility than any other asset class except cash.” On liquidity, Arnott said short-term funds can serve investors who are actively spending from their portfolios.

Short-duration funds typically have lower interest-rate sensitivity and higher near-term income, while longer-duration bonds generally offer higher long-term returns with greater price volatility. Credit quality and fund expenses affect net returns.

Advisors and fixed-income investors are reassessing short-duration strategies as longer-term Treasury yields remain elevated and policy direction stays uncertain.