First Single-Bond ETFs Zero in on Treasuries

August 09, 2022

On Tuesday, newcomer F/m Investments launched three Treasury ETFs that only hold a single security. The debut coincides with a growing investor appetite for government-backed bonds, based on July inflows.  

These funds stand out as the first of their kind and include the US Treasury 10 Year ETF (UTEN), the US Treasury 2 Year ETF (UTWO) and the US Treasury 3 Month Bill ETF (TBIL).  

The three funds all list on the Nasdaq and carry expense ratios of 0.15%.  

F/m’s ETF products all track ICE BofA-branded indexes that hold the most recently issued Treasury security in their targeted tenor, which, according to the funds’ prospectus, is known as the “on the run” or OTR security for that maturity.

Rather than simply holding a swath of available securities issued with a set maturity, no matter when they were issued, these new ETFs hold just one security, the most recently issued in that particular tenor. “Ease of access, tax efficiency, and a derivative market on these ETFs are just some examples of how they seek to deliver superior targeted access to the US Treasury market,” said Peter Baden, chief investment officer of Genoa Asset Management, which co-created the funds with F/m, in a press release. 

“This is the first [ETF] to really focus on giving investors access to the benchmark tenors that they see on CNBC or Bloomberg or quoted in the newspaper, and always stay exactly on that mark,” said Alexander Morris, president and CIO of F/m Investments. “When you think of the 10-year, you're thinking of a … consistent maturity security, which is what you'd get if you bought it and constantly sold it and rolled into the new one, and that’s cumbersome,” he added, noting that the funds offer an institutional-type solution in an ETF wrapper.  

Morris also notes that the funds deliver a monthly dividend, and says he expects to see an active options market on the ETFs develop.  

F/m has another seven ETFs covering different Treasury security maturities still in registration. The firm is a multiboutique investment platform that provides products and services from investment managers to advisors and institutional investors.  

 

Contact Heather Bell at [email protected] 

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