What is the TLH ETF?

In the realm of finance, Exchange-Traded Funds (ETFs) have emerged as an intriguing and accessible way for investors to diversify their portfolios. Among the plethora of options, the TLH ETF, also known as the iShares 10-20 Year Treasury Bond ETF, stands out as a notable choice for those seeking exposure to U.S. Treasury bonds within a specific maturity range. Let's delve into the key aspects of this ETF and explore its unique characteristics that make it an intriguing financial instrument.

TLH: Overview

The TLH ETF, managed by BlackRock's iShares, is designed to track the performance of the ICE® U.S. Treasury 10-20 Year Bond Index, also known as the Underlying Index. This index measures the performance of U.S. Treasury obligations with remaining maturities greater than or equal to ten years and less than twenty years. As of February 28, 2023, the Underlying Index comprised 34 issues, reflecting the breadth of its coverage within this specific maturity range.
One notable feature of the Underlying Index is its emphasis on publicly-issued U.S. Treasury securities with outstanding face values of $300 million or more. Excluded from the index are inflation-linked securities, Treasury bills, cash management bills, government agency debt, and zero-coupon issues stripped from coupon-paying bonds. This selection criterion ensures a focus on fixed-rate U.S. dollar-denominated securities that align with the ETF's investment objective.

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TLH: Investment Approach

The TLH ETF employs an indexing strategy to achieve its investment goal. Unlike actively managed funds that aim to outperform their benchmark indexes, this ETF prioritizes tracking its Underlying Index. This strategy has its advantages, as it reduces the risks associated with poor security selection and seeks to provide consistent after-tax performance.
Within the realm of indexing, the TLH ETF employs a representative sampling strategy. This approach involves investing in a representative subset of securities that collectively mirrors the investment profile of the Underlying Index. These selected securities share similar investment characteristics, fundamental attributes, and liquidity measures with those present in the Underlying Index. This strategy allows for the achievement of lower costs and improved after-tax performance.

TLH: Portfolio Composition

The TLH ETF ensures that at least 80% of its assets are invested in the component securities of the Underlying Index. Additionally, it allocates a minimum of 90% of its assets to U.S. Treasury securities that align with the index. To enhance tracking, the fund may invest up to 10% of its assets in futures, options, and swaps contracts that are expected to assist in replicating the Underlying Index's performance.
Notably, the fund may lend securities, representing up to one-third of its total assets, including collateral received. This lending activity aims to generate additional returns for investors.

TLH: The Underlying Index Sponsorship

The Underlying Index is sponsored by ICE Data Indices, LLC, an independent entity separate from the ETF and its managing company. The Index Provider is responsible for determining the composition and relative weightings of the securities within the index. This transparent approach ensures that investors have access to information about the Underlying Index's market value and its components.

Conclusion

In conclusion, the TLH ETF offers investors a valuable opportunity to gain exposure to U.S. Treasury bonds with specific maturities in the 10-20 year range. Its indexing approach, representative sampling strategy, and focus on securities aligning with the Underlying Index set it apart as a financial instrument with unique characteristics. As always, before making any investment decisions, it's essential to conduct thorough research and consider your individual financial goals and risk tolerance.

Disclaimer: This article provides general information and analysis about the TLH ETF and does not constitute investment advice. The author is not providing any investment advisory services. Always consult with a qualified financial advisor before making investment decisions.

Sources:
The Fund's prospectus and official documentation.
ICE® U.S. Treasury 10-20 Year Bond Index methodology.
iShares by BlackRock official website.
U.S. Treasury Department resources.
Financial news and analysis platforms.

TLH ETF issuer
TLH ETF official page

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