Fixed income investors looking for mechanisms to extract yield outside of safe-haven government bonds can find a plethora of opportunities in one ETF: the FlexShares Ready Access Variable Income Fund (RAVI ).
The low-yield environment is certainly forcing investors to look beyond Treasury notes. Rather than sift through a mass of opportunities, RAVI can give investors varied fixed income exposure.
RAVI seeks maximum current income consistent with the preservation of capital and liquidity. The fund seeks to achieve its investment objective by investing at least 80% of its total assets in a non-diversified portfolio of fixed income instruments, including bonds, debt securities, and other similar instruments issued by U.S. and non-U.S. public and private sector entities.
Rather than opting for money market funds, investors can also use RAVI as a short-term solution to park capital. The ETF is an ideal option, especially given the low rates offered by money market funds or yields from Treasury notes.
“RAVI is one of several short-term debt funds marketed to investors who want to preserve capital while wringing out a bit more income than they can get from Treasuries,” an ETF Database analysis explained. “The Northern Trust portfolio team behind RAVI looks for short-term investment-grade debt, including public and private securities from U.S. and non-U.S. issuers.”
Active and Yield-Focused for the Short-Term
RAVI’s active management strategy means that its fund managers can get in and out of income-producing positions in a dynamic manner. it allows investors to stay dialed in to the market without having to actively manage it themselves—the fund essentially does it all for them.
“In our view, the variety of fixed-income assets available to the NTI investment team provides flexibility to manage the FlexShares Ready Access Variable Income Fund’s (RAVI) duration and liquidity according to their outlook for interest rates and market conditions,” a FlexShares Fund Focus article explained.
Furthermore, active management can identify opportunities while targeting a duration specific to meeting the twin goals of maximum yield and minimal volatility.
“Targeting durations above the three-month cap on money market funds, but below the 1.5-year minimum duration typically offered by short-term bond funds, may provide higher returns than money market funds while limiting the potential for principal volatility,” the Fund Focus added.
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