BNY Mellon goes ultra-short with first active ETF

Aug 31st, 2021 | By | Category: Fixed Income

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BNY Mellon Investment Management has introduced its first actively managed ETF with the launch of an ultra-short bond fund.

BNY Mellon goes ultra-short with first active ETF

BNY Mellon expects to roll out several more active ETF solutions later this year.

The BNY Mellon Ultra-Short Income ETF (BKUI US) has been listed on NYSE Arca and comes to market with $25 million in seed capital.

The fund is sub-advised by Dreyfus Cash Investment Strategies, a division of BNY Mellon and institutional manager of money market strategies.

The ETF aims to provide high current income while focusing on volatility management and downside protection. It invests in US dollar-denominated debt including government securities, corporate securities, asset-backed securities, and repurchase agreements as well as high-quality money market instruments such as commercial paper, certificates of deposit, time deposits, and bankers’ acceptances. Fixed, variable, and floating rate securities are all eligible for selection.

The fund will typically maintain an effective duration of one year or less as well as an average credit rating of at least A.

The portfolio managers combine top-down and bottom-up investment processes in a bid to achieve an optimal portfolio in terms of liquidity, current income, and the preservation of principal.

The ETF comes with an expense ratio of 0.12%. This is slightly lower than the $17 billion JPMorgan Ultra-Short Income ETF (JPST US), the largest active ultra-short bond ETF, which costs 0.18%.

John Tobin, Chief Investment Officer at Dreyfus Cash Investment Strategies, commented: “Given the current low rate environment, an ultra-short bond ETF seeks to address the growing demand for increased yield with less volatility than a short-term bond fund and potentially additional return over money market funds. The BNY Mellon Ultra Short Income ETF is a natural extension of our existing suite of liquidity solutions, and we’re especially excited to bring our ultra-short income capabilities to the ETF market.”

BNY Mellon expects to introduce several more active ETFs this year, each sub-advised by an affiliate of the firm. These include a trio of sustainability-focused equity ETFs sub-advised by Newton Investment Management, a sustainable corporate bond ETF sub-advised by Insight North America, and a high-conviction global ex-US equity ETF sub-advised by Walter Scott & Partners.

BNY Mellon’s active ETF solutions complement the firm’s suite of eight ultra-low-cost passive ETFs which debuted in April 2020 and have collectively accumulated more than $850m in assets.

Andy Provencher, Head of North American Distribution at BNY Mellon Investment Management, said: “Our mission in entering the ETF marketplace last year was to make our leading investment capabilities accessible to a broader range of clients through the ETF structure. We have an ambitious product pipeline of active ETFs that we’re excited to bring to market over the next several months. Continuing to launch active ETFs strengthens the suite of solutions we’re able to offer clients and deepens our relationships by meeting their evolving needs for more low-cost, tax-efficient investment strategies.”

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