Northern Trust’s FlexShares arm has filed for an ETF that screens the high-yield corporate debt space using fundamentals, the FlexShares High Yield Value-Scored US Bond Index Fund.
In addition to being rated below-investment-grade, bonds eligible for inclusion in the index must have been issued with at least 18 months to maturity and have at least a year of remaining maturity. They also must have at least $150 million in outstanding principal balance.
Selection & Weighting
From there, the fund’s index methodology evaluates the fundamentals of each security’s issuer, and uses those fundamentals in conjunction with market considerations to determine which are selected and how they are weighted.
Weightings are further adjusted to ensure the fund index’s duration reflects that of the parent index representing the selection universe. The index’s sector exposure must also come within 8% of the sector exposure of the selection universe. Individual issuers are limited to total weights of 5%, the prospectus says.
Northern Trust already offers seven fixed-income funds, the largest of which is the $2 billion FlexShares iBoxx 3 Year Target Duration TIPS Index Fund (TDTT); it’s FlexShares’ second-largest ETF.
The filing indicates the proposed fund will list on the NYSE Arca.
Contact Heather Bell at [email protected]