F/m Investments has launched a first of its kind ETF on Nasdaq today — the Ultrashort Treasury Inflation-Protected Security ETF (RBIL). The fund is the first ETF that invests solely in ultrashort TIPS with average durations of one year or less. F/m describes the fund as a “cash-like investment with inflation protection.”
RBIL seeks to track the Bloomberg U.S. Ultrashort TIPS 1-13 Months Total Return Unhedged USD Index. It has an expense ratio of 0.25%. The fund launched with $50 million in seed capital.
A Hedge Against Inflation
By focusing on TIPS with a shorter maturity, the fund minimizes interest rate sensitivity (a common risk with longer duration TIPS). TIPS adjust their principal to match movements in inflation. This makes RBIL an attractive option for investors looking to protect their purchasing power with less volatility than can be seen with longer-term TIPS, F/m says.
“As inflation spiked in 2021 and 2022, many investors saw their TIPS ETFs underperform because of their inherent duration,” said F/m CEO Alex Morris.
“In fact, any TIPS ETF with meaningful duration – even a so-called ‘short duration’ ETF – may have more interest rate risk than people realize. RBIL’s ultrashort duration is designed to solve that problem,” he added.
See More: Worried About Inflation? Consider TIPS ETFs
Additionally, the fund regularly issues dividends. Not only does this provide income to the investor, it eliminates the problem of “phantom income” that accompanies investments in individual TIPS. Because their principal changes with movements in inflation, investors in TIPS may experience gains that are not distributed to them. However, the ETF structure allows this concern to be circumvented.
“It is exciting to see F/m expand their fixed income ETF lineup,” said Todd Rosenbluth, head of research at TMX VettaFi. “They offer a range of innovative strategies to support financial advisors. I’m excited they will be joining us at the upcoming asset allocation summit.”
Last year, F/m expanded its offerings with three ETFs targeting the corporate bond market. The $16 billion firm is also behind the popular US Treasury 3-Month Bill ETF (TBIL ), which recently surpassed $3 billion in assets under management.
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