F/m Launches SGVA, the First Accumulator Series ETF

• The new Accumulator Series addresses investor demand for efficient solutions that prioritize total returns over the administrative burden of managing traditional dividend reinvestments.
• SGVA focuses on providing ultrashort Treasury exposure with maturities of a year or less by investing directly in other short-term treasury ETFs.
• The fund aims to mitigate tax drag and reinvestment inefficiencies by compounding investments within the portfolio and proactively managing the timing of holdings to avoid taxable distributions.

The Accumulator Series arrives at a moment where investors are re-evaluating the administrative burden of traditional income-generating assets. For many, the constant management of dividend reinvestments has become a secondary consideration to achieving efficient total returns. 

“I think we’ve seen investors who are just not that interested in dealing with dividends and payments and trying to figure out what to do,” said Alex Morris, CEO of F/m Investments. “There’s just a lot happening, and you certainly see evidence of that in the defined outcome ETFs that investors frequently want solutions that take care of themselves. They’re evergreen, they’re simple, they’re straightforward. They’re [saying], ‘Here’s the outcome I want, deliver me the solution that provides the outcome. Don’t just keep giving me all of the pieces and then make me do all of the work.’” 

Index-based strategies are efficient for many mandates. However, the F/m Accumulator series utilizes an active structure to prioritize lower cost, operational discretion, and flexibility. This framework allows the team to avoid the constraints of rigid index requirements. 

“This fund is listed as active. We do the Compoundr series that are passive. They both are deeply engaged. The only difference here is, by not having an index provider tell us what alternates we need to buy on a regular basis, we have more freedom to choose the appropriate security that we think is going to best proxy this, not the one that’s met the index criteria,” Morris noted. 

He added that in the cash space, if F/m didn’t have to pay an index provider, the firm could offer the products at a lower cost. Using active management also means that an index provider will not publicize every trade the fund is making in advance.

Through a tax-managed approach, the fund allows investments to compound inside its portfolio rather than distributing income to investors. By reducing income payments, the strategy seeks to eliminate the reinvestment inefficiencies and tax drag associated with traditional distributions.

The fund’s strategy focuses on proactively managing the timing of its portfolio holdings. By rotating underlying investments, it seeks to avoid holding positions on dividend record dates, thereby mitigating potential taxable events. To execute these rotations efficiently, it employs in-kind creation and redemption transactions. These transactions allow it to exchange securities, avoiding the need to sell assets for cash. By doing so, the fund effectively bypasses the taxable capital gains that would otherwise occur. 

The launch of SGVA is merely the first step in a larger strategic roadmap. As F/m Investments looks to scale the Accumulator Series, the firm plans to potentially adapt this total-return methodology to asset classes beyond its current fixed income roots, according to Morris. He further notes that this approach is more conducive with fairly static strategies rather than those that require frequent trading. 

The accumulator series builds upon other ETF offerings from the firm such as the F/m Ultrashort Treasury Inflation-Protected Security ETF (RBIL ) and the F/m Ultrashort Municipal Bond ETF (ZMUN). F/m oversees a lineup of 20 actively managed fixed income ETFs, with total assets under management now approaching $10 billion.

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