Invesco launches low cost ETFs on FRNs
29 May 2018 London
Image: Shutterstock
Invesco has launched three exchange-traded funds (ETFs) for investors wanting passive exposure to floating rate notes (FRNs), an asset class seeing increased demand for investors concerned about rising interest rates.
In 2017, 20 percent of the flows into European fixed-income ETFs went into FRN ETFs, and 55 percent in Q1 2018.
The new ETFs aim to deliver the returns of their respective benchmark indices, fewer fees, by investing physically in the underlying constituents.
Paul Syms, head of EMEA ETF fixed-income product management at Invesco, explained: “We expect these ETFs to appeal to investors who either think bond yields are going to rise or who just want to take a defensive stance on interest rates.”
Expanding on this, he continued: “Instead of paying a fixed coupon, an FRN pays coupons linked to a stated benchmark rate. For instance, you could have an FRN paying 0.7 percent above London interbank offered rate (LIBOR). If LIBOR goes up, the coupon goes up.”
Syms concluded: “We believe that making even simple improvements to a standard FRN index has the potential to deliver superior results for investors while also making them more efficient to replicate.”
“With these ETFs, we continue to build out our range of low cost passive fixed-income ETFs following the launch of our broad investment grade and hard currency emerging market ETFs towards the end of last year.”
In 2017, 20 percent of the flows into European fixed-income ETFs went into FRN ETFs, and 55 percent in Q1 2018.
The new ETFs aim to deliver the returns of their respective benchmark indices, fewer fees, by investing physically in the underlying constituents.
Paul Syms, head of EMEA ETF fixed-income product management at Invesco, explained: “We expect these ETFs to appeal to investors who either think bond yields are going to rise or who just want to take a defensive stance on interest rates.”
Expanding on this, he continued: “Instead of paying a fixed coupon, an FRN pays coupons linked to a stated benchmark rate. For instance, you could have an FRN paying 0.7 percent above London interbank offered rate (LIBOR). If LIBOR goes up, the coupon goes up.”
Syms concluded: “We believe that making even simple improvements to a standard FRN index has the potential to deliver superior results for investors while also making them more efficient to replicate.”
“With these ETFs, we continue to build out our range of low cost passive fixed-income ETFs following the launch of our broad investment grade and hard currency emerging market ETFs towards the end of last year.”
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