Fidelity Files For Factor Bond ETFs

Funds focus on duration and yield.

Fidelity Investments has filed for two fixed-income ETFs that target individual factors. The Fidelity High Yield Factor ETF is actively managed and set to list on the NYSE Arca, while the Fidelity Low Duration Bond Factor ETF tracks an index and is slated to list on Cboe Global Markets, the parent company of ETF.com.

Focus On Yield

The high-yield factor fund models its portfolio on the ICE BofAML BB-B US High Yield Constrained Index with regard to risk and credit-quality characteristics. The fund can invest in domestic and non-U.S. issuers, as well as issues that may have higher or lower credit quality than is typical of the high-yield space or issues by companies that may be in questionable financial condition, the prospectus says.

However, the portfolio is ultimately determined by a quantitative model that uses value and quality factors to target issues expected to deliver strong returns and that are not expected to default, the document notes.

Duration In Focus

The fund targeting duration will track the Fidelity Low Duration Investment Grade Factor Index, which covers U.S. investment-grade floating-rate notes and U.S. Treasury notes. The index, under typical conditions, will have a maximum duration of one year.

The prospectus notes the benchmark seeks to find a balance between interest rate risk and credit risk that delivers a better risk/return profile than the cap-weighted floating-rate universe.

Neither filing included tickers or expense ratios.

Contact Heather Bell at [email protected]