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Hermès federated launched its first ETFs with the launch of two actively managed short-term fixed income funds.
Registered on NYSE Arca, the funds are the ETF Federated Hermes Short Duration Corporate (FCSH US) and Federated Hermes Short Duration High Yield ETF (FHYS US).
According to the Pittsburgh-based AUM $ 634 billion asset manager, the funds are designed for investors seeking high current income with reduced inflation and interest rate risk compared to products that invest in longer term titles.
The funds also incorporate Federated Hermes proprietary ESG assessment while providing the traditional benefits of the ETF structure including tax efficiency, cost reduction and intraday trading.
John B. Fisher, President and CEO of Federated Advisory Companies, said: “With the growing appetite of US clients for fixed income securities, our first two ETF strategies build on the legacy of Federated Hermes in responsible investing, diligent credit analysis and experience providing options at every step of the yield curve. In addition, we believe that investors in high yield, short duration ETFs can benefit from the capabilities of an experienced active manager.
The Federated Hermes Short Duration Corporate ETF is managed by John Gentry, Senior Portfolio Manager, Head of Federated Hermes Corporate Fixed Income Group, which has 11 members averaging 17 years of industry experience and 13 years at Federated Hermes.
The fund invests in high quality securities denominated in USD, composed mainly of corporate debt with residual maturities of between one and five years. It will retain an effective dollar-weighted duration of between 1.5 and 3.5 years, while up to 10% of the assets may be allocated to non-investment grade securities.
The construction of the portfolio is guided by various economic and market indicators in order to identify securities with favorable yield spreads compared to their credit risk.
The ETF has an expense ratio of 0.30% due to a ten basis point fee waiver in place until the end of 2022.
The Federated Hermes Short Duration High Yield ETF, meanwhile, is managed by Senior Portfolio Manager Steven Wagner, Portfolio Manager Tony Venturino and Senior Portfolio Manager Mark Durbiano, who heads Federated’s National High Yield Group. Hermes composed of 14 members with an average of 20 years of experience in the industry. experience and 16 years at Federated Hermes.
The fund invests in a diversified portfolio of high yield USD denominated corporate bonds, bank loans, leveraged loans and floating rate loans while maintaining an effective term of three years or less.
Federated Hermes looks for securities offering the potential of high returns for the default risks assumed. Its selection process consists of a credit-intensive fundamental analysis of the issuers, including financial strength, product strength, competitive position, management expertise, as well as economic and industry factors.
The ETF comes with a 0.51% expense ratio due to a similar ten basis point fee waiver.