Last week, F/m Investments added three more ETFs to its lineup, bring its total to 13 funds. However, the firm has pivoted in a new direction after debuting its unique family of Treasury ETFs: corporate bonds.
The new ETFs are as follows:
- F/m 2-Year Investment Grade Corporate Bond ETF (NYSE Arca: ZTWO)
- F/m 3-Year Investment Grade Corporate Bond ETF (NYSE Arca: ZTRE)
- F/m 10-Year Investment Grade Corporate Bond ETF (NYSE Arca: ZTEN)
“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 Alexander Morris, F/m’s president and chief investment officer, in a press release.
With these launches, F/m has expanded its lineup’s coverage beyond Treasury debt to encompass investment-grade corporate bonds. Morris noted later in an interview that traditional bond indexes are not designed to be investable, but rather to reflect the “the status and the health“ of a particular part of the market.
A New Angle on Corporate Bonds
He characterizes the ICE indexes underlying the new funds as more liquid and less concentrated. The new products track “investable” indexes that offer “precise maturity exposure,” according to the press release.
“We wanted to build this to be a better investment, and that’s where I think we ended up,” Morris added.
Indeed, the funds track ICE indexes that are narrower than the typical bond indexes and focus on issues that, at rebalance, mature within six months of the targeted maturity period. Additionally, rather than being cap-weighted like most bond indexes, the issues within the index are equal weighted, which Morris notes keeps the issuers with the most debt from having outsized representation in the index.
The prospectus indicates that the underlying indexes range in scope from 224 securities in ZTEN’s underlying index to roughly 530 securities for the benchmarks underlying ZTWO and ZTRE. Compare that with something like the $45 billion Vanguard Intermediate-Term Corporate Bond ETF (VCIT), which has more than 2,000 holdings.
The new F/m funds all have expense ratios of 0.15% and list on the NYSE Arca.
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