Get Active, Core Bond Exposure with the “BNDC” ETF

While investors are debating whether the tried-and-true 60-40 allocation can still work in today’s market, it’s still a must to get core bond exposure. Rather than select individual bonds themselves, investors can opt for an active approach via the FlexShares Core Select Bond Fund (BNDC).

BNDC seeks total return and preservation of capital. The fund invests at least 80% of its net assets in U.S. dollar-denominated investment-grade fixed-income securities either directly or indirectly through exchange-traded funds and other registered investment companies.

The fund may invest, without limitation, in mortgage- or asset-backed securities, including to-be-announced transactions, and purchase and sell securities on a when-issued, delayed delivery or forward commitment basis.

“The FlexShares Core Select Bond Fund (BNDC) is an ETF that seeks to provide a diversified, core fixed-income portfolio that balances total return and income, while offering price stability and diversification away from equities,” a FlexShares fund focus noted. “The ETF is actively managed by institutional fixed-income managers at Northern Trust, the adviser of the FlexShares funds. These managers aim to build a diversified bond portfolio through existing ETFs, using both the FlexShares ETF family and ETFs from other providers, to provide exposure across sectors of the fixed income markets.”

“For example, the Fund captures exposure to the major fixed-income asset classes such as Treasuries, corporate bonds, and mortgage-backed securities (MBS), while also choosing ETFs that offer potentially more refined, value-added exposures to a variety of products such as TIPS,” the focus added.

BNDC Chart

BNDC data by YCharts

At the heart of BNDC’s strategy is their active management by experienced fixed income experts.

“The fund-of-funds model employed by the FlexShares Core Select Bond Fund (BNDC) gives investors access to Northern Trust’s institutional fixed-income expertise,” the focus continued. “The Fund’s portfolio managers have the ability to change the fund’s duration and risk allocation in response to changes in interest rates or risk levels in various sectors. This ability to make tactical adjustments allows the Fund’s managers to express their current views on the evolution of the fixed-income market, which may help investors capture opportunities while managing risk.”

Active management gives fund managers the ability to adapt to market movements on the fly.

“Our belief is that building a portfolio of ETFs also allows managers to make adjustments to the Fund’s composition more efficiently,” the focus stated. “They can potentially fine-tune the Fund’s duration or sector exposure through a small number of ETF transactions, rather than through dozens of transactions involving individual securities. We believe this efficiency helps keep the Fund’s turnover and fees low.”

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