The top four ETFs in FlexShares’ line-up that took in the most new assets in June are funds that offer potential upside in an inflationary environment, including real assets and income-generating funds.
The FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA) took the top spot after seeing $100 million in net inflows during the month. The fund has taken in $151 million in net inflows year to date.
NFRA seeks investment results that generally correspond to the price and yield performance of the STOXX Global Broad Infrastructure Index. The market cap-weighted index invests in companies that derive at least 50% of their revenues from segments including energy, communications, utilities, transportation, and — in an unusual twist — government outsourcing, like hospitals, prisons, and postal services, according to VettaFi.
To maintain diversification, the index imposes certain constraints, such as limits on the overall weighting of each segment. The portfolio is dominated by North American equities, followed by Japan, Australia, and the U.K.
Infrastructure issuers tend to have predictable cash flows, as they provide essential services used in all economic environments. Infrastructure stocks carry both equity and interest rate exposure and can provide an alternative source of income, according to FlexShares.
The FlexShares Morningstar Global Upstream Natural Resources Index Fund (GUNR) dropped to the second spot after two months at the top. GUNR saw $83 million in June inflows, bringing the fund’s year-to-date inflows to $1.1 billion.
GUNR is one of the more unique products in the Commodity Producers Equities category. The fund focuses on the “upstream” portion of the natural resources supply chain, maintaining meaningful exposure to the water and timber industries along with positions in companies engaged in energy production, metals extraction, and agriculture.
GUNR is tilted heavily towards mega-cap stocks, including big oil and major mining firms. GUNR can help investors gain “indirect” exposure to commodity prices. Because the profitability of the component stocks tends to move in unison with the spot prices of the underlying resources, this fund should perform well when natural resource prices are on the rise.
The FlexShares High Yield Value-Score Bond Index Fund (HYGV) reemerged as an investor favorite after dropping off the leaderboard in April. HYGV took in $37 million in June and $369 million year to date, driven by investors looking to add income while avoiding the riskiest junk debt.
HYGV tracks a proprietary index of high-yield bonds screened for value and quality. HYGV’s methodology rates issuers based on factors like valuation, solvency, management efficiency, and profitability. The securities are screened for liquidity, and the portfolio imposes caps on individual bonds, issuers, sectors, duration, turnover, and credit score, according to VettaFi.
The FlexShares Ready Access Variable Income Fund (RAVI) dropped to fourth place, taking in $26 million during the month. The fund has seen $301 million in year-to-date inflows.
RAVI is one of several short-term debt funds marketed to investors who want to preserve capital while wringing out a bit more income than they can get from Treasuries. The Northern Trust portfolio team behind RAVI looks for short-term investment-grade debt, including public and private securities from U.S. and non-U.S. issuers.
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