Episode summary
Joanna Gallegos on XHLF: A Smarter Solution for Duration Risk
ETF Spotlight
· · Hosts: Jeffrey Sherman, Bill Sokol · Guests: Joanna Gallegos
Summary
Joanna Gallegos said BondBloxx built its Treasury ETF lineup to solve duration drift, a problem she said became more visible after rates moved sharply. She argued that traditional maturity-based Treasury ETFs can let duration change as bonds age and markets move, which can leave investors with more rate risk than intended unless they keep rebalancing.
XHLF is presented as BondBloxx’s six-month target-duration fund, using zero-coupon Treasury Bills and monthly rebalancing to keep duration close to the target. Gallegos said the broader BondBloxx Treasury suite spans eight target-duration options from six months to 20 years, all designed to track Bloomberg target duration indices and reduce reinvestment risk. She framed the product as a precise way to hold the short end while still earning income and maintaining liquidity.
She also argued that XHLF’s 3 basis point expense ratio is competitive because the ETF structure is operationally efficient and removes the need for investors to constantly monitor and trade to manage duration. In her view, the fund is especially relevant in a higher-for-longer or uncertain rate environment, where investors want low volatility, low credit risk, and a more predictable Treasury allocation.
Key takeaways
- Joanna Gallegos said BondBloxx built XHLF to address duration drift in Treasury ETFs and keep investors aligned to a specific rate target.
- She said XHLF maintains a six-month duration through monthly rebalancing and a methodology tied to target-duration indices.
- Gallegos said the fund is meant for investors who want short-end Treasury exposure, income, and liquidity without constant monitoring.
- She said XHLF’s 3 basis point expense ratio is possible because the ETF structure is operationally efficient and passes through institutional costs.
- Gallegos said the six-month fund can be a practical holding when rates are uncertain or volatility is elevated, especially for strategic cash management.
Notable quotes
“we recognize that there was a problem in the current ETFs out there in the treasury space”
“And that core problem was duration drift”
“we were the first at BondBloxx to market an ETF that's specifically built to address duration drift and reinvestment risk”
“So, for this period of time, it seems to be a smarter place if you're concerned about uncertainty and volatility”
“XHLF can serve a similar role in your portfolio and it often has greater yield potential”
How the episode opens
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Seeking Alpha is not a licensed securities dealer, broker, US Investment adviser, or investment bank. Hey, everyone. Daniel Snyder back with another ETF Spotlight.
This week we're jumping into the world of Treasuries and Treasury Duration with none other than Joanna Gallegos, Co-Founder over at BondBloxx, and we're going to talk about the XHLF Fund today. So let's go ahead and dive into the conversation. Joanna, I just want to - give us a background of how this fund created and even the suite that you've built over there.
Where did this come from? When did you see the need? Were people talking to you and they were like, we need this duration of treasury funds and you provided.
How did this begin? So we recognize that there was a problem in the current ETFs out there in the treasury space. And that core problem was duration drift.
It's a significant issue that I think investors probably overlooked until interest rates started changing so dramatically about four years ago. US treasury ETFs are a popular and efficient way to gain exposure to treasuries for income generation and portfolio stability. But most of these ETFs, the current ETFs before our target duration ETFs came out, they hold bonds across a broad range of maturities, and that creates challenges for investors who need to keep their portfolios aligned to a specific duration target.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- duration risk
- treasury etfs
- zero-coupon t-bills
- duration drift
- 6-month duration targeting
Companies and tickers mentioned
- BondBloxx
Watch the episode
Watch “Joanna Gallegos on XHLF: A Smarter Solution for Duration Risk” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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