Federated enters ETF market with 2 active bond funds


Federated Hermes, a $ 645 billion asset manager largely focused on the money market, embarks on ETFs with two actively managed fixed income strategies that he filed with the Securities and Exchange Commission Thursday afternoon.

Once approved and launched, the Short-Term Corporate Bond Strategy and Short-Term High Yield Bond Strategy will remove Federated from the list of the top few remaining asset managers with no exchange-traded fund offering.

“Our long-term strategy around ETFs is that we recognize that the way clients access investment expertise continues to evolve,” said Brandon Clark, who joined Federated in July 2020 as chief investment officer. ETF activities.

“We are seeing more and more activity in ETFs,” said Clark. “It’s the way to meet our customers where they are. From our point of view, this is a way of offering our expertise in another vehicle.

Before joining FederatedClark has held similar positions at Legg Mason and The Vanguard Group, where he was instrumental in the development of ETF ranges.

While this is the first official entry into the ETF space for the Pittsburgh-based asset manager, Federated filed plans to launch an ETF 10 years ago.

The plan, which was not acted upon, involved an ultra-short-term strategy that would have equated to a higher yielding money market fund.

In Federated’s current line of mutual funds and segregated accounts, the company has $ 91 billion in fixed income strategies and $ 100 billion in equity strategies. The remaining $ 454 billion is money market funds.

With the ETF industry experiencing record growth in 2021, Federated still has the potential to find a niche with its late arrival in the space, said Todd Rosenbluth, director of mutual fund and ETF research at the CFRA.

“The industry has moved significantly where asset managers who have a long-standing presence in the mutual fund world have been successful in bringing together ETF assets,” said Rosenbluth. “The adoption of active fixed income ETFs has increased dramatically. “

As examples of the potential appetite for fixed income active ETFs, Rosenbluth cited the success of the $ 4.3 billion Pimco Active Bond ETF (BOND), the SPDR DoubleLine Total Return Tactical (TOTL) ETF of 3.1. billion dollars and the $ 2 billion Fidelity Total Bond ETF (FBND).

Bridging the gap between stocks and bonds

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