Global X Funds has announced the launch of a new suite of passively managed ETFs aimed at income-seeking investors, such as retirees.
The new fund suite may appeal to retirees who are looking for target levels of income during retirement.
The first two funds in the suite, which have been listed on Cboe BZX, seek to provide a target level of yield with distributions paid out on a monthly basis.
The are structured as ETFs-of-ETFs and linked to indices developed by Wilshire Associates.
The Global X TargetIncome 5 ETF (TFIV US) seeks to achieve a 5% yield, net of fees, by tracking the Wilshire TargetIncome 5% Plus Index.
The Global X TargetIncome Plus 2 ETF (TFLT US) seeks to achieve the yield on the current 10 Year US Treasury Note plus 2%, net of fees, by tracking the Wilshire TargetIncome 10-Year Treasury +2% Plus Index.
The underlying indices allocate across 11 ETFs, each representing a different income-paying asset class. The asset classes include developed and emerging market equities, developed and emerging market bonds (including investment grade and high yield), senior loans, preferred securities, REITs, MLPs, energy infrastructure equities, US Treasury bonds, and US TIPs.
The ETFs selected to represent these asset classes come from Global X’s own stable of funds as well as third-party providers such as iShares, DWS X-trackers, SPDR ETFs, Charles Schwab, and VanEck.
There are typically five or six ETFs within each index at any one time. Weights are assigned in increments of 5% up to a maximum of 20%. Rebalancing occurs on a quarterly basis.
“By combining Wilshire’s robust multi-asset analytics and deep institutional allocation expertise, we’ve structured indices that aim to target specific yield objectives while mitigating risks,” said Jason Schwarz, president of Wilshire Analytics and Wilshire Funds Management. “We’re proud to bring these indices to market and very pleased to work with Global X, which has established itself as a leader in income ETFs.”
Global X believes the funds may prove useful for investors seeking income during retirement. Although there is no guarantee that the funds will meet their targets, their outcome-based approach may help investors achieve specific income levels from their retirement assets.
“Despite a recent spate of rate hikes, investors continue to face a low yielding market,” said Jay Jacobs, head of research and strategy at Global X. “As the baby boomer generation increasingly transitions into retirement, we believe that TFIV and TFLT can offer potential solutions to investors looking to achieve specific income goals with their portfolios.”
TFIV has an expense ratio of 0.77%, consisting of a 0.39% management fee and 0.38% in acquired fund fees and expenses.
TFLT has an expense ratio of 0.78%, consisting of a 0.39% management fee and 0.39% in acquired fund fees and expenses.