F/m Investments debuts precision-maturity corporate bond ETFs

Jan 19th, 2024 | By | Category: Fixed Income

Washington-based investment adviser F/m Investments has introduced a new series of ETFs providing precision-maturity exposure to investment-grade credit.

Alexander Morris, President and CIO of F/m Investments

Alexander Morris, President and CIO of F/m Investments.

Listed on NYSE Arca, the new suite consists of three funds at launch that target corporate bonds around the two-year, three-year, and ten-year tenors of the yield curve.

They are the F/m 2-Year Investment Grade Corporate Bond ETF (ZTWO US), F/m 3-Year Investment Grade Corporate Bond ETF (ZTRE US), and F/m 10-Year Investment Grade Corporate Bond ETF (ZTEN US).

Each fund comes with an expense ratio of 0.15%.

The three ETFs track ICE indices that include fixed-rate, investment-grade corporate bonds denominated in US dollars.

Setting these indices apart from conventional bond indices, however, is their unique focus on securities with remaining maturities within a six-month window of their target yield curve tenor. Bonds crossing beyond this six-month threshold are promptly removed, while new issuances that align with the maturity criteria are regularly incorporated, maintaining the indices’ relevance and establishing the ETFs’ usefulness as tools for precise duration management.

Moreover, each index adopts an equal-weighting approach, as opposed to the capitalization-weighting commonly seen in bond indices. This strategy prevents issuers with significant debt from disproportionately influencing index returns.

Alexander Morris, President and Chief Investment Officer at F/m Investments, highlighted the shift from traditional bond benchmarks, describing these indices as reflective rather than investable and emphasizing the need for indices that accurately represent market segments.

Morris said: “Fixed income, in particular duration, is experiencing a renewal in investment interest but the current index-based ETFs have not kept pace with innovation. Traditional bond indices provide information about the broad market, but were never designed to optimize your investing experience. Adding to the toolset we started with US Benchmark Series we are excited to continue to develop investors’ abilities to take control of their fixed income exposure.”

F/m Investments also offers the ‘US Benchmark Series’ of fixed income ETFs that comprise just a single underlying US Treasury bond. This suite consists of ten ETFs that invest in the most current (on-the-run) issue for the three-month, six-month, 12-month, two-year, three-year, five-year, seven-year, ten-year, 20-year, and 30-year tenors of the Treasury yield curve. Each ETF comes with an expense ratio of 0.15%, and collectively the suite houses over $4 billion in assets under management.

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