Federated Hermes, an active management firm with a focus on sustainable investing, has announced in a press release the launch of two new active transparent fixed income ETFs that focus on short duration. The Federated Hermes Short Duration Corporate ETF (FCSH) and the Federated Hermes Short Duration High Yield ETF (FHYS) offer two new options for investors who are worried about inflation and the interest rate risk tied up in longer-duration exposures.
Federated Hermes brings a wealth of experience in fixed income investing from its mutual funds, SMAs, and separate accounts. These active fixed income ETF options offer shorter-duration opportunities in an environment of rising interest rates while also evaluating for ESG risks.
“With a growing U.S. client appetite for fixed-income, our first two ETF strategies build upon Federated Hermes’ heritage of responsible investing, diligent credit analysis and experience in providing compelling options at every step of the yield curve,” said John B. Fisher, president and chief executive officer of Federated Advisory Companies, in the press release. “Additionally, we believe that investors in high-yield and short-duration ETFs can benefit from the capabilities of an experienced active manager.”
The Federated Hermes Short Duration Corporate ETF (FCSH) invests primarily in investment-grade, corporate fixed income securities. The fund seeks to have a duration that is between 1.5 and 3.5 years, but as the fund is actively managed, the advisor can lengthen or shorten the duration depending on interest rate outlook.
FCSH can invest in foreign securities, and up to 10% of the fund can also be in fixed income securities that are rated below investment-grade. It can also invest in U.S. Treasury securities, MBS, CMBS, asset-backed securities, and derivative contracts.
FCSH carries an expense ratio of 0.30%.
The Federated Hermes Short-Duration High Yield ETF (FHYS) seeks to provide investors with high current yield income by investing primarily in below investment-grade fixed income securities. The fund seeks to have a duration that is usually less than 3.0 years, but as the fund is actively managed, the advisor can lengthen or shorten the duration depending on interest rate outlook.
FHYS invests in high-yield corporate bonds, floating-rate term loans, bank loans, covenant-lite loans, and syndicated loans, as well as collateralized loan obligations. The fund also can invest in derivative contracts. Investments are not limited to any particular maturity range, but the advisor does take into account the issuer’s financial condition, plus their business and production strength, competitive position, and management expertise.
FHYS carries an expense ratio of 0.51%.
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