BIL parks cash in the shortest-maturity Treasury bills available, functioning as a money market alternative that trades like a stock. It's the ETF equivalent of keeping money in T-bills without the hassle of buying them directly at auction.
How It Works
The fund holds T-bills maturing in 1-3 months, constantly rolling them at expiration to maintain ultra-short duration. Unlike money market funds that hold commercial paper or repos, this is pure government debt. The portfolio typically contains 20-40 individual bills, weighted by market value, with an average maturity around 45 days.
Key Features
- Zero credit risk — backed by U.S. government, unlike prime money market funds
- Intraday liquidity lets you move cash instantly vs overnight settlement for mutual funds
- Current 3.32% yield moves with Fed funds rate, beating most bank savings accounts
Risks
- Yields can drop to near-zero when Fed cuts rates — happened 2020-2021, killing returns
- Small tracking error vs holding T-bills directly due to 0.14% expense ratio eating into yield
- No FDIC insurance like bank deposits, though default risk is essentially zero
Who Should Own This
Perfect for investors who need to park cash for weeks or months while staying fully invested — think house down payments or tax reserves. Also works as the ballast in risk-parity strategies or as collateral for options traders who want their cash to earn something.