ETF Spotlight: Mortgage-Backed Securities | ETF Trends

ETF Spotlight on the FlexShares Disciplined Duration MBS Index Fund (NasdaqGM: MBSD), part of an ongoing series.

Assets: $5.0 million

Objective: The FlexShares Disciplined Duration MBS Index Fund tries to reflect the performance of the BofA Merrill Lynch Constrained Duration US Mortgage Backed Securities Index, which tracks mortgage-backed securities but also hedges against interest rate risk.

Holdings: Top holdings include TBA GNMA 6.0% 30 YRS Dec 4.7%, FHLMCGLD Mortpass 6.0% April 2039 3.2%, FNMA Mortpass 4.5% Nov. 2018 3.1%, Federal National Mortgage Assoc 3.5% mortgage bonds 3.1% and FHLMCGLD Mortpass 5% July 2020 2.9%.

What You Should Know:

  • Northern Trust’s FlexShares sponsors the ETF.
  • MBSD has a 0.20% expense ratio.
  • The fund has 60 holdings and the top ten components make up 30.4% of the overall portfolio.
  • MBSD’s top issuers include Federal National Mortgage Association 40.4%, Government national Mortgage Association 32.1% and Federal Home Loan Mortgage Corporation 26.1%.
  • The fund includes 66.5% agency bonds and 33.5% government bonds.
  • The fund began trading September 3, 2014.
  • MBSD is up 0.2% over the past week and down 0.1% over the past month.
  • The ETF has a 1.62% 30-day SEC yield and a 3.3 year effective duration.
  • The underlying index may include 30-year, 20-year and 15-year fixed rate residential mortgage pass-through securities, the index provider’s methodology will adjust holdings to achieve a 3.25 to 4.25 year duration.
  • Potential investors should use limit orders as the ETF is relatively new and shows an average daily volume of about 9,700 shares.

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