General Fixed Income

Fixed Income ETFs Fixed income ETFs, designed to generally track bond market indexes, share many of the same benefits of equity ETFs, including: Tax efficiency Lower costs (ordinary brokerage commissions apply) Transparency Buying and selling flexibility All day tracking and trading Diversification Wide array of investment strategies

In addition, fixed income ETFs also offer institutional investors: Tracking of bond indexes Continuous pricing of portfolios of bonds An efficient way to allocate assets to bonds Bond market allocation by maturity and quality Interest rate risk management strategies Futures alternative

Tracking of bond indexes The expansion of the ETF universe into the bond market increases indexing opportunities to include bonds of different maturities and credit quality. Each fixed income ETF seeks results that correspond to the price and yield performance of its underlying index.

Continuous pricing of portfolios of bonds Continuous pricing of entire portfolios of bonds provided by fixed income ETFs gives institutional investors a more efficient way to respond to bond market movements than bond mutual funds, which are only priced once a day, and individual bonds, which may require many trades to match the diversified exposure of a fixed income ETF.

An efficient way to allocate assets to bonds The benefits of ETFs make them an excellent asset allocation alternative to individual bonds and bond mutual funds. Unlike individual bonds, fixed income ETFs provide diversification with one trade, transparency of pricing throughout the day on an exchange, and low minimum investments. When investors compare fixed income ETFs to bond mutual funds, they may find the intraday pricing and trading, transparent holdings, and lower expense ratios of ETFs a more attractive way to allocate assets to the bond market.

Bond market allocation by maturity and quality Fixed income ETFs can provide broad or targeted exposure to several maturity sectors of the bond market, and to corporate debt and U.S. Treasury bonds.

Interest rate risk management strategies Because ETFs can be purchased on margin and sold short, fixed income ETFs provide an efficient vehicle for investors to hedge interest rate fluctuations.

Futures alternative The benefits discussed in ETFs vs. Futures can now be applied to the bond markets. ETFs can serve as an alternative for institutions or money managers seeking to trade bond market index exposure, but who do not use futures or are subject to policy restriction prohibiting the use of futures in their strategy.

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