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Fidelity Launches 2 Factor ETFs: Portfolio Products

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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.

Rational Funds Launches Income Opportunities Fund

Rational Funds announced the launch of the Rational Funds Income Opportunities Fund (RTFIX).

RTFIX offers an alternative, tactically managed, fixed income strategy focused on mitigating risk while generating stable monthly cash flow. To achieve this, the fund invests primarily in commercial mortgage-backed securities (CMBS) and other commercial real estate structured securities such as REITs.

Specifically, the strategy takes positions in duration legacy CMBS credit bonds, short duration CMBS that generate yields from fixed monthly coupon payments, and new issue CMBS when the market is suffering from dislocation and illiquidity. With these investments, the strategy offers the ability to outperform both equity and fixed income markets through price appreciation and trade generated gains.

Fundamental to this strategy is RTFIX’s comprehensive due diligence process on the underlying collateral of each investment, including, but not limited to: analysis of property cash flows, competitive sub-market, potential lease rollovers, capital expenditures budgets and bond cash flows.

The portfolio management team identifies entry points for investing, including distressed selling situations and/or distressed sellers and periods of market illiquidity caused by new regulations that creates opportunity to purchase bonds below market value.

The Rational Income Opportunities Fund trades under the tickers RTFIX, RTFAX and RTFCX.

TCA by E-Trade Adds Retirement Planning Capabilities for RIAs

TCA by E-Trade enhanced its Liberty platform with IncomeConductor, a comprehensive income distribution strategy platform launched in 2017 by WealthConductor LLC.

IncomeConductor gives RIAs the ability to create, track and manage retirement income plans for their clients.

IncomeConductor provides a suite of solutions for RIAs to develop and present structured, yet dynamic income distribution strategies to their clients — customized to the individual needs and goals of each investor. IncomeConductor’s web-based platform delivers powerful planning and management tools that are now available through Liberty, the advanced digital custody platform of TCA by E-Trade.

Through IncomeConductor, RIAs on the Liberty platform will have access to: tools to create retirement income plans for clients using a time-segmented strategy; an interactive planning experience with built-in flexibility to make adjustments; and white-labeled client reports and marketing materials that can be branded with customized logos, disclosures and contact information.

Betterment for Advisors Customizes Account Openings

Betterment for Advisors has streamlined and personalized the process for advisors to add clients to its platform. Advisors can now choose the client’s account type, goal, initial funding and specific allocation, obviating the need for the client to input such information.

“Should an advisor choose to work this way, a client will never even have to deal with the sign up flow and will instead end up in their account with the details added in,” according to a spokeswoman.

The latest refinement follows the introduction of the Flexible Portfolio on the B4A platform in March. Flexible Portfolio allows advisors to adjust the asset weights of the funds offered under the B4A’s Core Portfolio.


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