F/m Investments Launches US Credit Series ETFs
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Insights
The introduction of the US Credit Series ETFs by F/m Investments marks a significant advancement in the fixed income market, particularly within the realm of investment grade credit. The distinct feature of these ETFs is the precise maturity exposure, which allows investors to target specific points on the yield curve. This precision can be especially attractive in an environment where duration management is crucial due to fluctuating interest rates.
From a market research perspective, the success of F/m's previous ETFs, which garnered $4 billion in assets under management (AUM), suggests a strong appetite for innovative fixed-income products. The total fee of 15 basis points (bps) is competitive and could influence investor preference, potentially attracting capital from higher-fee products and prompting competitors to re-evaluate their fee structures.
Assessing the financial implications of the new ETFs, the focus on investment grade credit is noteworthy. Investment grade bonds are considered lower risk, which could be appealing during times of economic uncertainty. The alignment with ICE indices ensures a level of credibility and may facilitate the ETFs' acceptance among institutional investors.
Moreover, the timing of the launch could be strategic. If the market anticipates interest rate changes, these ETFs provide a tool for investors to adjust duration exposure accordingly. This can have implications for portfolio management strategies, potentially leading to shifts in asset allocation among investors seeking to mitigate interest rate risk.
The launch of these ETFs can be seen as a response to the evolving economic landscape, where precise maturity exposure is increasingly important for managing interest rate risk. The ability to target specific maturities can help investors hedge against economic shifts, such as inflation or deflation and policy changes by central banks.
An economist's view might highlight the potential for these ETFs to influence the broader bond market by providing a new benchmark for investment grade credit. This could lead to greater price transparency and liquidity in the bond market, with long-term implications for the cost of borrowing for corporations and the overall efficiency of capital markets.
First investable index in investment grade credit with precise maturity exposure
In collaboration, F/m and Intercontinental Exchange, Inc. (“ICE”), re-imagined ICE’s mature investment grade credit indices to be investable via ETFs.
“Fixed income, in particular duration, is experiencing a renewal in investment interest but the current index-based ETFs have not kept pace with innovation,” said F/m’s President and Chief Investment Officer, Alexander Morris.
F/m burst onto the ETF scene in August 2022 with the US Benchmark Series ETFs – the first single security ETFs offering precise yield curve exposure that rocketed to
The initial three ETFs being listed today are the F/m 2-Year Investment Grade Corporate Bond ETF (Ticker: ZTWO); the F/m 3-Year Investment Grade Corporate Bond ETF (Ticker: ZTRE); and the F/m 10-Year Investment Grade Corporate Bond ETF (Ticker: ZTEN). Each ETF will track an ICE index specific to its newly created index and will be listed on NYSE Arca. Each fund has a total fee of 15 bps. (For more information on the indices, please visit www.fminvest.com)
“Traditional bond indices provide information about the broad market, but were never designed to optimize your investing experience,” said Morris. “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 balances multiple factors when developing new products. The new US Credit ETFs seek seeks to provide investors:
- Precision – Regular rolling to reflect recent issuances within the range of +/- 6 months from maturity target.
- Liquidity – Recent issues, current coupons, giving a current market experience.
- Equal weight -- Representation of the market, reducing overexposure to financials.
- ETF ready – Built by investors for investors as an ETF from the outset.
F/m Investments Senior Portfolio Manager of the ETFs Jud Hennessy drives the point home adding, “We are answering investors’ calls for thoughtful investments: precise, liquid, and investable.”
About F/m Investments
F/m Investments is a registered investment advisor and an affiliate of Diffractive Managers Group, a multi-affiliate asset manager and centralized distribution and operations platform whose affiliates manage more than
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call (888)123-4589 or visit our website at www.fminvest.com. Read the prospectus or summary prospectus carefully before investing.
Risks:
As with all ETFs, Shares may be bought and sold in the secondary market at market prices. Interest rate risk is the risk of losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Fund Risks: Fixed-Income Market Risk. The market value of a fixed income security may decline due to general market conditions that are not specifically related to a particular issuer, such as real or perceived adverse economic conditions, changes in the outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. Interest Rate Risk. Interest rate risk is the risk of losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Mortgage and Asset-Backed Securities Risk. The Fund may invest in mortgage and asset backed securities, which represent pools of mortgages or other assets, including consumer loans or receivables held in trust. In a period of rising interest rates, these securities may exhibit additional volatility. Preferred Stock Risk. A preferred stock may decline in price, or fail to pay dividends when expected, because the issuer experiences a decline in its financial status.
Derivatives Risk. A derivative is an instrument with a value based on the performance of an underlying currency, security, index or other reference asset. The use of derivatives involves risks different from, or greater than, the risks associated with investing in more traditional investments. Derivatives involve costs, may create leverage, and may be illiquid, volatile, and difficult to value.
High Portfolio Turnover Risk. In seeking to track the Underlying Index, the Fund may incur relatively high portfolio turnover. The active and frequent trading of the Fund’s portfolio securities may result in increased transaction costs to the Fund, including brokerage commissions, dealer mark-ups and other transaction costs, which could reduce the Fund’s return.
Liquidity Risk. Certain securities held may be difficult (or impossible) to sell at the time and at the price the Adviser would like. New Fund Risk. The funds are newly organized, management investment company with no operating history.
Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates.
Quasar Distributors, LLC, distributor. Quasar Distributors, LLC is not affiliated with the RBB Fund, Inc or F/m Investments, LLC.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240117084379/en/
Media Enquires
Lyceus Group
Tucker Slosburg
206-635-4196
fmpr@lyceusgroup.com
Source: F/m Investments
FAQ
What are the tickers for the initial three ETFs listed in the US Credit Series ETFs?
When did trading begin for the US Credit Series ETFs?
What is the total fee for each fund in the US Credit Series ETFs?
What is the website to find more information on the indices?
