This report provides an overview of the FPA Short Duration Government ETF's performance in the second quarter of 2025. The fund achieved a commendable return of 1.60% during this period. The portfolio management team strategically allocated new investments, primarily focusing on 5-year Treasury maturities, while carefully evaluating other options such as 7-year Treasuries based on rigorous stress tests. This commentary offers insights into the fund's approach to maintaining a balance between yield and risk within a government bond framework.
FPA Short Duration Government ETF: Second Quarter 2025 Review
In the second quarter of 2025, the FPA Short Duration Government ETF delivered a solid performance, achieving a return of 1.60%. This positive outcome reflects the strategic decisions made by the fund's management, particularly in the allocation of incoming capital. Throughout the quarter, significant inflows into the Fund were channeled into 5-year maturity Treasuries. This decision was based on a thorough assessment of market conditions and the fund's investment criteria.
Conversely, 7-year Treasury bonds were not considered suitable for the portfolio at that time. This exclusion was primarily due to concerns identified through the fund's proprietary 100 basis points Stress Test, which projected a potential short-term loss for these instruments. This highlights the fund's disciplined approach to risk management, prioritizing capital preservation alongside yield generation. The fund maintained an effective duration of 4.18 years and a yield-to-worst of 3.68% as of June 30, 2025, indicating a balanced exposure to interest rate fluctuations while aiming for attractive returns from high-quality government securities.
This quarter's results underscore the importance of a meticulous investment process, especially in fixed-income markets. The fund's ability to selectively deploy capital into the most advantageous Treasury maturities, while adhering to strict risk parameters, demonstrates a prudent and effective management strategy. Investors can draw inspiration from this disciplined approach, recognizing that careful analysis and strategic allocation are paramount to navigating complex financial landscapes and achieving consistent returns.