With exchange traded funds, distributions usually arrive monthly or quarterly, but the newly minted SoFi Weekly Income ETF (NYSE: TGIF) is flipping that script by making every Friday pay day for income-starved investors.
TGIF clearly uses a novel approach, but it’s relevant at a time when Treasury yields or at historic lows and cash investments are hardly worth the trouble.
TGIF is an actively managed fund that seeks to achieve its investment objective by investing in U.S. dollar-denominated investment grade and non-investment grade securities and instruments. The fund plans to distribute income from its investments to shareholders every Friday. The fund is the latest addition to SoFi’s innovative family of ETFs, after launching its first four ETFs last year, SoFi Select 500, SoFi Next 500, SoFi 50, and SoFi Gig Economy ETFs.
“TGIF fills a unique void by promising weekly distributions. Although there are some monthly dividend stocks and equity-based ETFs on the market, while bond funds deliver monthly distributions, no ETFs had made weekly payouts prior to TGIF’s arrival,” according to InvestorPlace.
TGIF: Thank Goodness It’s Friday
The Federal Reserve dropping interest rates to historic lows is making life difficult on advisors allocating to fixed income asset and their income-starved clients. Those scenarios could open the door to rapid success for TGIF, but the new ETF isn’t a risk-free bet.
“TGIF generates income by holding corporate bonds, both investment-grade and high-yield fare. As a result, credit risk is in play, and that’s something to consider in the current climate. In March alone, $400 billion worth of investment-grade corporate debt was downgraded one level by at least one of the three major ratings agencies,” according to InvestorPlace.
Importantly, TGIF’s credit risk is augmented by reduced interest rate risk, a relevant consideration because although rates are expected to remain low for some time, they really don’t have anywhere to go but up. TGIF targets bonds with durations of three years or less, putting it in short-term territory.
“Actively managed, the TGIF ETF aims to deliver distributions every Friday. I don’t believe this is a gimmick by its issuer, SoFi or by Income Research + Management, the 30-year-old old bond firm that manages the new fund,” according to InvestorPlace.
TGIF charges 0.59% per year, or $59 on a $10,000 investment.
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