F/m Investments Debuts New Series of Investment Grade Corporate Bond ETFs

The new ETFs available

First up is the F/m 2-Year Investment Grade Corporate Bond ETF (ZTWO), which as its name suggests provides exposure to the most recent (also known as "on-the-run") investment grade (BBB rated or higher) corporate bonds of a two-year maturity.

Unlike the corporate bond ETFs of the past, ZTWO only targets issues of a two-year maturity, as opposed to holding a portfolio of different bonds that average out to a two-year maturity.

The benchmark index for ZTWO is the new ICE 2-Year Target Maturity Index. To achieve exposure to it the ETF will continually buy and sell underlying bonds to maintain the two-year target maturity band via monthly rebalancing.

Following ZTWO are the F/m 3-Year Investment Grade Corporate Bond ETF (ZTRE) and the F/m 10-Year Investment Grade Corporate Bond ETF (ZTEN), which as their names suggest hold three and ten-year investment grade corporate bonds.

They function in the same manner, targeting the ICE 3-Year Target Maturity Index and the ICE 10-Year Target Maturity Index with monthly rebalancing.

Benefits of these ETFs

The new ETFs from F/m Investments bring a unique set of benefits to the investment table, addressing several key investor needs.

One of the most significant advantages these ETFs offer is the aspect of consolidation. Investors seeking exposure to specific segments of the corporate bond market, particularly those with two-, three-, or ten-year maturities, no longer need to buy individual bonds over the counter.

Instead, these ETFs package a diverse array of bonds into a single, highly liquid ticker. This liquidity is a notable benefit, as it simplifies the process of acquiring and liquidating positions in these bonds, a task that is traditionally more complex and less fluid with individual bond issues.

Another critical feature of these ETFs is their monthly rebalancing. This approach ensures that the ETFs maintain constant exposure to the desired segment of the yield curve.

For investors who are looking to align their investments with specific time horizons, this can be particularly beneficial. Regular rebalancing aligns the ETFs with the investor's target maturity, providing a more predictable investment outcome compared to traditional bond ETFs that may drift before quarterly or annual rebalancing.

Moreover, these ETFs offer the added benefit of monthly distributions. This feature stands out, especially when compared to the standard practice of semi-annual payments in the bond market.

Monthly distributions provide investors with a more frequent income stream, which can be particularly appealing for those who rely on their investments for regular income or who prefer more frequent returns on their investment.

Lastly, the cost efficiency of these ETFs is noteworthy. With a fee of only 0.15%, investors are looking at a relatively modest expense of $15 for every $10,000 invested. This fee structure makes these ETFs an affordable option for investors looking to gain exposure to investment-grade corporate bonds with specific maturities.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.