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Thursday, August 11, 2022

A Three-Year-Old Multi-Boutique Enters the ETF Biz

Reported by Neil Anderson, Managing Editor

A three-year-old, multi-boutique asset manager in the Mid-Atlantic is entering the ETF business. The team is rolling out their first three ETFs, and they have at least seven more planned.

Alexander Robert "Alex" Morris
F/m Investments
President, Chief Investment Officer
On Tuesday, Alex Morris, president and chief investment officer of F/m Investments, unveiled the launch of the Washington, D.C.-based firm's first three ETFs. The new funds are part of F/m's new US Benchmark Series, which is powered by two of F/m's boutiques: Cincinnati-based Genoa Asset Management LLC (a fixed income SMA and UMA shop) and the newly created North Slope Capital LLC (a white label advisory firm). And the new funds are series of the RBB Fund, Inc., a series trust.

The US Benchmark Series (which the F/m folks are pitching as a way to "equitize the yield curve") features single-security ETFs that invest in different types of U.S. Treasuries. The initial three ETFs, which debuted this week on the Nasdaq, are: the US Treasury 3 Month Bill ETF (TBIL), the US Treasury 2 Year ETF (UTWO), and the US Treasury 10 Year ETF (UTEN). And per SEC filings, the F/m plans to launch seven more ETFs in the US Benchmark Series, for seven more U.S. Treasuries tenors: 30-year, 20-year, 7-year, 5-year, 12-month, 9-month, and 6-month.

The initial three US Benchmark Series ETFs come with an expense ratio of 15 basis points. Morris and Peter Baden, CIO of Genoa, PM all three funds, and F/m (dba North Slope) serves as the funds' investment advisor. UTEN tracks the ICE BofA Current 10-Year US Treasury Index, UTWO tracks the ICE BofA Current 2-Year US Treasury Index, and TBIL tracks the ICE BofA 3-Month Treasury Bill Index.

Several firms, including Jane Street Capital (the new funds' lead market maket) and Mirae Asset Securities (USA) Inc., have committed seed funding for the new ETFs. Indeed, TBIL already has $21.39 million in AUM, UTEN already has $19.93 million, and UTWO already has $1.5 million. A Jane Street spokesperson praises the US Benchmark Series for broadening "access to treasury markets, allowing investors greater flexibility and ease in meeting their individual investment goals."

Baden describes the new funds' potential applications as "limitless and still being discovered." Morris adds that the US Benchmark Series "will revolutionize the financial markets."

"Ease of access, tax efficiency, and a derivative market on these ETFs are just some examples of how they seek to deliver superior targeted access to the US Treasury market," Baden states.

"We are equitizing the yield curve, giving investors low-friction access to US Treasuries — as well as the ability to short or potentially use equity options to express views on rates," Morris states.

Arnie Reichman, chairman of RBB, lauds the US Benchmark Series as "one of the greater innovations in the last few years" for providing "nearly universal access to invest in the yield curve."

The new funds' other service providers include: Cohen & Company, Ltd. as independent accounting firm; Faegre Drinker Biddle & Reath LLP as legal counsel; ICE Data Services as index provider; Quasar Distributors as distributor and underwriter; U.S. Bank Global Fund Services as administrator and transfer agent; and U.S. Bank, N.A. as custodian and securities lending agent. 

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