It might seem a bit much for an ETF to provide income, liquidity, and minimal volatility, but it’s not too big of an ask for the FlexShares Ready Access Variable Income Fund (RAVI).
With its active management style, RAVI can seek income-producing opportunities that are conducive to the market environment. Its liquidity is crucial in getting in and out of positions quickly.
Per the fund description, RAVI seeks maximum current income consistent with the preservation of capital and liquidity. The fund seeks to achieve its investment objective by investing at least 80% of its total assets in a non-diversified portfolio of fixed-income instruments, including bonds, debt securities, and other similar instruments issued by U.S. and non-U.S. public and private sector entities.
The dollar-weighted average portfolio maturity of the fund is normally not expected to exceed two years. It may invest up to 20% of its total assets in fixed-income securities and instruments of issuers in emerging markets.
“Investors need liquid assets for many reasons, such as providing an emergency cash reserve or offering a place to temporarily hold funds earmarked for short-term investment needs,” a FlexShares Fund Focus article noted. “Prior to the financial crisis of 2008, money market funds offered a stable source of liquidity that still generated acceptable returns. Since then, however, new restrictions have greatly reduced the yields on money market funds. As a result, investors interested in liquid assets that provide higher relative returns have had to look for alternatives in ultra-short-term fixed-income investment vehicles.”
Outpacing Money Market Funds
RAVI provides an ideal alternative to money market funds. RAVI accomplishes this objective by targeting “durations above the three-month cap on money market funds, but below the 1.5-year minimum duration typically offered by short-term bond funds, may provide higher returns than money market funds while limiting the potential for principal volatility.”
“We believe the FlexShares Ready Access Variable Income Fund (RAVI) offers investors a vehicle with stronger return potential than money market funds, while retaining the liquidity necessary to hold funds for use in near-term investment decisions,” FlexShares said further. “Taking advantage of Northern Trust’s expertise in the fixed-income markets, the Fund may fill a gap between money market funds and short-term bond funds.”
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