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Fidelity FLDR targets low duration to reduce rate swing risk
The Fidelity Low Duration Bond Factor ETF (FLDR) is on track to add over $2 billion in assets this year, aiming to keep portfolio duration at one year or less.
ETF Trends says Fidelity’s Fidelity Low Duration Bond Factor ETF, FLDR, is designed for a higher-for-longer interest rate environment, with an emphasis on limiting the impact of sudden interest rate moves while still seeking meaningful income.
According to ETF Trends, FLDR tracks the Fidelity Low Duration Investment Grade Factor Index, which targets high-quality U.S. investment grade floating-rate and stable U.S. Treasury notes. The index enforces duration caps, with a mandate to maintain portfolio duration of one year or less, and it also uses risk-return modeling to balance interest rate exposure and credit risk.
ETF Trends adds that FLDR seeks improved returns and baseline risk measures versus traditional unmanaged U.S. investment grade floating-rate benchmarks. To implement the strategy, the fund uses statistical sampling to replicate index returns using a smaller set of selected securities based on duration, maturity, interest rate sensitivity, security structure, and credit quality.
The outlet also notes that FLDR carries an expense ratio of 15 basis points, invests at least 80% of assets in securities included in its target index under normal market conditions, and retains the ability to lend securities to generate additional income. ETF Trends reports the fund is on track to accumulate more than $2 billion in assets under management this year.