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.
Next page: The latest news
The Latest News:
- Pre-crisis mortgage-backed securities are attracting more attention.
- “We’ve seen strong demand for those assets recently,” Dan Adler, a senior portfolio manager at Amundi Smith Breeden, said in a CBNC article.
- The pre-crisis MBS have improved since the U.S home prices bottomed out in early 2012.
- However, according to the Mortgage Bankers Association, the securities may not find enough demand as the Federal Reserve is no longer the largest purchaser of agency mortgage backed securities, reports HousingWire.
- The U.S. Congress is cogitating on relinquishing control over Fannie Mae and Freddie Mac.
- “If Congress cannot agree on a smooth, more certain path forward, I urge you, Director Watt, to engage the Treasury Department in talks to end the conservatorship,” Tim Johnson, the South Dakota Democrat who originally wrote a bill to eliminate Fannie Mae and Freddie Mac, said, Bloomberg reports.
FlexShares Disciplined Duration MBS Index Fund
For past stories in this series, visit our ETF Spotlight category.
Max Chen contributed to this article.