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June 18, 2018 at 10:47 AM
Fidelity Investments expanded its ETF lineup with the introduction of two factor ETFs: Fidelity Low Duration Bond Factor ETF (FLDR) and Fidelity High Yield Factor ETF (FDHY).
The new ETFs have total expense ratios of 15 basis points for FLDR and 45 basis points for FDHY.
They are available to individual investors and financial advisors commission-free through Fidelity’s online brokerage platforms. These new fixed income and high-income factor ETFs apply Fidelity’s quantitative analysis and proprietary risk management to seek sources of income to help drive better portfolio outcomes.
“With a quantitative, rules-based methodology at its core and an active liquidity overlay, Fidelity High Yield Factor ETF leverages our extensive high-income capabilities to offer an enhanced exposure to the high-yield market for ETF investors,” said Greg Friedman, head of ETF management and strategy at Fidelity. “Fidelity Low Duration Bond Factor ETF is unique in its category because it seeks a balance between credit risk and interest rate risk, on top of pursuing higher income potential than a money market with lower volatility than a short-term bond fund.”
The Fidelity High Yield Factor ETF (FDHY), which trades on the New York Stock Exchange, seeks to provide a high level of income and may also seek capital appreciation by normally investing at least 80% of its assets in debt securities rated below investment grade. In buying and selling securities, the fund uses a proprietary multifactor quantitative model to systematically screen over 1,000 bonds and select those with strong return potential and low probability of default using a value and quality factor-based methodology. The fund uses the ICE Bank of America Merrill Lynch BB-B US High Yield Constrained Index as a guide in structuring the fund and selecting its investments as it relates to credit quality distribution and risk characteristics. The fund also employs active security selection to optimize trading and reduce transaction costs.
The Fidelity Low Duration Bond Factor ETF (FLDR), which trades on the CBOE BZX Exchange, will seek to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity Low Duration Investment Grade Factor Index. The fund will normally invest at least 80% of its assets in securities included in the index. The Fidelity Low Duration Investment Grade Factor Index, which is comprised of U.S. investment-grade floating rate notes with less than 5 years maturity and U.S. Treasury notes with 7 to 10 years maturity, is designed to optimize the balance of interest rate risk and credit risk, such that both returns and risk measures may be improved relative to traditional U.S. investment-grade floating rate note indexes.
Amplify ETFs Launches the Amplify EASI Tactical Growth ETF
Amplify ETFs announced the launch of the Amplify EASI Tactical Growth ETF (EASI), an index-based ETF that seeks to participate in the upside of high-quality growth companies during upward trending equity markets while tactically rotating to fixed income in downward trending equity markets.
EASI seeks investment results that generally correspond to the EASI Tactical Growth Index.
The initial universe for the equity allocation consists of all securities listed on the New York Stock Exchange and Nasdaq. Constituents are then narrowed by excluding all securities with an average daily volume in the last 50 days of 300,000 or more shares. All remaining companies are scored once a month in two major areas: price performance and fundamentals. The final equity portfolio will invest at least 80% of its total assets in 33 to 50 holdings, in accordance with the index.
The determination of the index being weighted 100% to equities or 100% to fixed income is called the “Long-Term Tactical Allocation Signal.” It measures and compares the monthly changes in the price of the equity components using the trailing 12-month exponential moving average.
Beacon Capital Management Launches Vantage 3.0 American Portfolios
Beacon Capital Management announced a new line of investment options—Vantage 3.0 American Portfolios. This new line of portfolios is designed for increased participation in market upsides through American Funds products while adding Beacon’s loss reduction risk management strategy to help protect from catastrophic losses.
Vantage 3.0 American Portfolios are the fourth line of portfolios offered by Beacon Capital Management, each model equipped with its own proprietary risk management strategy. Beacon’s Vantage 2.0 and Vantage 3.0 subscribe to equal sector allocation; however, under this approach, while losses can be limited in down years, gains may be limited in years when just a handful of sectors drive the performance of the S&P 500, such as with technology, financials and health care in 2017.
The Vantage 3.0 American Portfolios maintain the same loss prevention protection as the original Vantage 3.0 portfolios but offer investors new domestic and international allocations through American Funds products.
Vantage 3.0 American Portfolios seek to benefit from the collective knowledge of the investment committees of American Funds that back and proactively manage each of the mutual fund holdings.
The Vantage 3.0 American Portfolios can also provide access to institutional rates through F-Class share funds, which can lower fund expense ratios by as much as 40% from the retail A share funds when obtaining access to the lowest cost F3 share class. Additionally, through the use of interclass exchanges, advisors who currently utilize American Funds may also have the ability to transition existing shares over to this new platform without triggering a taxable event.
