Federated Hermes Joins The ETF Space

December 17, 2021

Federated Hermes, a Pittsburgh-based asset manager with approximately $634 billion in assets under management, made its first foray into ETFs with two short-duration bond funds.

The Federated Hermes Short Duration Corporate ETF (FCSH) and the Federated Hermes Short Duration High Yield ETF (FHYS) both debuted on the NYSE Arca on Friday. FCSH will start with an expense ratio of 0.30%, while FHYS starts with a 0.51% fee. Both funds have a 10 basis point fee waiver in place until the end of 2022.

Federated Hermes ETF Director Brandon Clark said short-duration bond management is a natural entry point for the firm’s first two ETFs based on the firm’s history in that end of the fixed income spectrum.

“We believe these portfolios will be a useful tool for investors who may be looking to shorten their overall portfolio duration in a rising rate environment,” he said.

FCSH will primarily hold investment-grade corporate bonds from U.S. and foreign firms, with a target of keeping its portfolio’s average effective duration between 1 1/2 years and 3 1/2 years. Its benchmark is the Bloomberg 1-5 Year Corporate Index, which has returned a loss of 0.43% over the past 12 months.

FHYS will hold a mix of U.S. and foreign corporate junk bonds, along with options to invest in bank loans, collateralized debt obligations and other asset-backed securities at the discretion of the portfolio managers. It intends to maintain an effective duration under three years in normal market conditions, and is benchmarked against the ICE BofA 0-3 Year Duration-to-Worst US High Yield Constrained Index.

Contact Dan Mika at [email protected], and follow him on Twitter

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