FlexShares Ready Access Variable Income Fund (RAVI)RAVI

FlexShares Ready Access Variable Income Fund (RAVI)

Profile:

The FlexShares Ready Access Variable Income Fund (RAVI) is an actively managed exchange-traded fund (ETF) that invests primarily in a diversified portfolio of U.S. dollar-denominated investment grade and high-yield debt securities with durations ranging from short-term to intermediate-term. RAVI's portfolio is designed to provide a high level of current income while maintaining low interest-rate risk and offering investors high liquidity.

Objective:

RAVI seeks to maximize current income and minimize interest-rate risk.

Issuer:

• Reputation and Reliability: The FlexShares brand belongs to Northern Trust, a leading global asset manager with over 130 years of experience, known for its strong reputation and commitment to client success.
• Management: RAVI is managed by Northern Trust Asset Management, a team with significant expertise in fixed income investing. The portfolio manager, David L. Turner, CFA, has over 30 years of experience in fixed income research and portfolio management.

Market Share:

• RAVI has a 0.30% market share within its Multi-Sector Bond category, making it a relatively smaller player compared to broader-based fixed income ETFs.

Total Net Assets:

• RAVI currently has approximately $20.9 million in net assets under management (AUM), placing it among smaller ETFs within its category.

Moat:

• Active management: Unlike many fixed income ETFs that track broad market indexes, RAVI benefits from active management, allowing the team to select and manage individual bonds within the portfolio to potentially enhance performance and mitigate risks.
• Focus on short- and intermediate-term maturities: The focus on shorter maturities aims to limit interest rate risk, making RAVI a potentially attractive option in rising interest rate environments.
• High liquidity: As an ETF, RAVI offers high liquidity with intraday trading on major exchanges, making it suitable for investors who require flexibility and quick access to funds.

Financial Performance:

• Annualized total returns (since inception): 0.45% (3 years), 1.61% (5 years)
• Trailing 12-month total returns: -1.15%
• Benchmark Comparison: RAVI has lagged the Barclays US Agg Bond Index, but its lower duration has provided protection from rising interest rates, resulting in better performance during recent periods of market volatility.

Growth Trajectory:

• The current macro-economic environment with rising interest rates may favor RAVI's short-duration strategy. However, its smaller AUM compared to major competitors might limit its growth potential.

Liquidity:

• Average Trading Volume: Approximately 2,133 shares per day, indicating moderate liquidity for an ETF in its size category.
• Bid-Ask Spread: Average spread of 0.04%, indicating low transaction costs when buying or selling shares.

Market Dynamics:

• Market dynamics influencing RAVI include rising interest rates, inflation, and economic uncertainty. These factors affect bond yields and could impact RAVI's performance depending on its portfolio allocation and duration positioning.

Competitors:

• Some competitors in RAVI's category include Vanguard Short-Term Treasury ETF (VGSH), iShares Short Treasury Bond ETF (SHV), and SPDR Bloomberg Short Term Treasury Bond ETF (BSV).

Expense Ratio:

• RAVI's expense ratio is 0.30%.

Investment Approach and Strategy:

• Strategy: Actively managed portfolio of US dollar-denominated fixed income securities.
• Composition: Investment-grade and high-yield bonds with maturities from short to intermediate term, aiming for high income and low interest-rate risk.

Key Points:

• Actively managed ETF seeking high income and low interest rate risk.
• Emphasis on short and intermediate maturities for limited duration exposure.
• Moderate liquidity with a relatively low expense ratio.
• May benefit from its shorter-duration portfolio in a rising interest rate environment.

Risks:

• Market Risk: Interest rate fluctuations could negatively impact bond prices.
• Credit Risk: RAVI invests in high-yield bonds, which carry higher default risk.
• Liquidity Risk: Despite moderate trading volume, there's a risk that shares might become challenging to buy or sell quickly at the desired price, especially in volatile market conditions.

Who Should Consider Investing:

• Investors seeking high current income from a fixed income ETF.
• Investors aiming to reduce interest-rate risk within their bond portfolio.
• Investors who value portfolio flexibility with access to quick liquidity.
• Investors comfortable with moderate credit risk in their pursuit of higher income.

Fundamental Rating Based on AI:

7.5 out of 10

This AI-based rating considers factors like RAVI's active management, low duration positioning, moderate trading volume, competitive expense ratio, and potential benefit in rising rate environments. However, its smaller market share compared to major competitors and higher credit risk due to exposure to high-yield bonds are considered negative factors in this evaluation.

Resources and Disclaimers:

• This information is based on data and analysis gathered from sources including, but not limited to, FlexShares ETF website, Yahoo Finance, Morningstar, and Bloomberg.
• This document is intended for informational purposes only. It does not constitute investment advice, and investors should consider consulting with a professional financial advisor before making investment decisions.