GSY Invesco Ultra Short Duration ETF

FlexShares, the ETF division of Northern Trust, is beginning to become a formidable player in the exchange-traded fund world. The firm has several ETFs in both the broad equity and the bond world, four of which have amassed over $100 million in assets in their short times on the market.

As of late, the company appears to be expanding once again as the company launched two new ETFs in late September, the ex-US Market Factor Tilt Index ETF (TLTD) and the Emerging Market Factor Tilt Index ETF (TLTE). These two new products help to round out the company’s lineup of factor tilt funds, acting as a nice complement to the American-focused TILT while also bringing the total offering up to six products.

Yet it now looks as though FlexShares is by no means done expanding in the ETF world, as evidenced by its latest ETF launch here in October. The company has just revealed its newest fund the Ready Access Variable Income Fund (RAVI), bringing FlexShares’ lineup up to seven funds overall (read Looking for Safety? Try These Money Market ETFs).

However, it should be noted that RAVI represents a rather large departure for FlexShares as this product is the first for the company that targets the money market world.  It also marks the first product for the company that utilizes an active management technique, although it is worth pointing out that despite the active management the product still costs a low 25 basis points a year after fees.

RAVI ETF in focus

The new fund looks to help cash investors try to maintain liquidity and reach for higher returns, without excessive volatility. RAVI features a variable net asset value and can invest beyond the limitations of a traditional money market fund. The portfolio consists of investment grade debt securities from around the world, including sovereign and corporate debt from a variety of nations (see Five Great Global ETFs for Complete Equity Exposure).

In terms of exposure, the fund can only put 25% in any single country, while emerging markets can only comprise 20% of the assets as well. Meanwhile, asset backed securities will not make up more than 10% of assets while what the fund terms as ‘illiquid’ securities are not more than 15% of the product either.

Money Market ETFs

This new RAVI ETF looks to offer up an intriguing alternative to some of the other choices already in the money market ETF space. Still, the fund looks to face some intense competition from a variety of companies, so success is by no means guaranteed (read the Comprehensive Guide to Money Market ETFs).

Two of the most popular—and similar to RAVI—are the Guggenheim Enhanced Short Duration Bond ETF (GSY) and the PIMCO Enhanced Short Maturity Strategy Fund (MINT). Both of these products also utilize an active approach and focus in on short-duration securities for their exposure.

Currently, both of these funds are zeroing in on American bonds that are ultra-safe, although cash does make up a big chunk of both GSY and MINT. Yields aren’t much for either fund, but with these low duration securities you are really paying for safety as opposed to the high payouts (see Three Excellent Dividend ETFs for Safety and Income).

Furthermore, investors should note that, combined, the two products have more than $2.2 billion in AUM (most in MINT), while volumes are decent for both as well, suggesting that RAVI could have some difficulty finding its niche in this tough market. Still, RAVI does manage to—just barely—beat out its entrenched competitors on a fee front, suggesting that it could be the low cost choice in the space.

The product costs two basis points less than GSY and a full ten less than MINT, giving it a decided advantage on the fee front. While these might seem like small differences at first glance, in today’s low rate environment, every basis point counts, suggesting that RAVI may be able to attract a decent following among investors seeking an ultra-safe way to play the markets.

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GUGG-EN SH DUR (GSY): ETF Research Reports
 
PIMCO-E SMSF (MINT): ETF Research Reports
 
(RAVI): ETF Research Reports
 
FLEXS-MRN USMFT (TILT): ETF Research Reports
 
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