FlexShares Plans Active Bond ETF

October 24, 2011

FlexShares, the ETF arm of Chicago-based Northern Trust, filed regulatory paperwork with the Securities and Exchange Commission to expand its new presence in the world of ETFs with plans to market an actively managed fixed-income ETF. The fund will be focused on relatively short-maturity, investment-grade debt issued by the U.S. government, foreign governments and private-sector entities.

The FlexShares Liquid Access Fund will invest at least 65 percent of its assets in a wide variety of nondiversified fixed-income assets, according to the registration statement, which also said the ETF is categorized as a “nondiversified” portfolio under the Investment Company Act of 1940. The fund’s investments will include government-issued mortgage-backed securities and municipal bonds.

The filing also said the duration of the ETF’s holdings won’t normally exceed one year, and will be determined by Northern Trust’s investment policy committee. Duration is a measure of the sensitivity of a bond or bond portfolio’s price to changes in interest rates.

The filing marks a new chapter in Northern Trust’s second foray into the world of exchange-traded funds, namely into actively managed funds. The company rolled out four index ETFs last month focused on different pockets of the equities markets and on inflation-protected Treasurys. Northern Trust’s first go at marketing ETFs ended with the shutdown of 17 funds in early 2009 in the wake of the 2008 market crash, just nine months after launch. The funds had gathered about $33 million in assets.

FlexShares also leaves itself the option of investing a portion of the fund in a variety of investments including derivatives such as foreign currency forwards.

The new filing didn’t list the expense ratio or the ticker for the new FlexShares Liquid Access Fund.



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