FlexShares updates corporate bond funds with new indices
Northern Trust has announced new underlying indices for two of its FlexShares bond ETFs, effective immediately.
The Credit-Scored US Corporate Bond Index Fund (SKOR) will use the Northern Trust US Corporate Bond Quality Value Index and the Credit-Scored US Long Corporate Bond Index Fund (LKOR) has switched to the Northern Trust US Long Corporate Bond Quality Value Index. Both indices provide exposure to investment grade bonds with a focus on the quality and value factors. Current fund shareholders are not required to take any action as a result of these changes.
“At FlexShares, our mission is first and foremost to meet investor goals and we’re constantly evaluating how best to align our products with those objectives,” says Darek Wojnar, Head of Funds and Managed Accounts at Northern Trust Asset Management. “In this low-yielding market environment, income generation and capital appreciation are critical for today’s investors. We believe these needs can be most effectively met by prioritising quality and value.”
The underlying indices of the FlexShares SKOR and LKOR funds are designed to optimise exposure to the quality and value factors by analysing inputs such as valuation, spread, solvency, management efficiency and profitability. The eligible securities within each index are adjusted based on their effective duration and are subject to several constraints to manage systemic risk.
“By applying a factor-based approach to both our high-yield and investment grade funds, we’re aiming to provide advisors and their clients with a more consistent experience across FlexShares’ fixed-income suite,” says Paulami Kar, Head of Product Strategy at Northern Trust Asset Management. “We believe a factor-based strategy focusing on quality and value could be an effective way to build a portfolio of investment grade bonds in the current market environment.”