Make Future Planning more Predictable with Fixed Maturity ETFs

In today’s uncertain and fast-changing financial environment, investors are increasingly turning to solutions that offer liquidity and greater predictability of outcomes.

These include Fixed Maturity ETFs, which blend the defined maturity of individual bonds with the benefits of Exchange-Traded Funds (ETF) such as tradability, cost-efficiency and diversification2. As the name suggests, Fixed Maturity ETFs consist of a basket of bonds with similar maturity dates. Bonds within the ETF may pay regular interest, and a final payout, which is made in the fund’s maturity year. And like individual bonds, exposure to interest rate risk diminishes as the fund nears maturity date.

By enabling investors to target specific yield-curve points, these innovative vehicles can serve a multitude of purposes for future planning, such as meeting pension liabilities. Or at a more individual level, funding specific future life events such as a wedding, buying a home or paying university fees. And with investors looking to capture higher yields ahead of expected central bank cuts, they are garnering a lot of attention. 

Here are some things to know about Fixed-Maturity ETFs:

  • Predictability of yield3

Traditional fixed income ETFs generally offer rolling exposure to bond markets as bonds within the ETF mature. Beyond mark-to-market risk, this entails reinvestment risk, the risk of reinvesting in bonds that earn less than the original investment. Fixed Maturity ETFs, on the other hand, come with a known date of liquidation and the composition of these funds remains unchanged until maturity year. This provides visibility on an estimated yield to maturity3 the day you invest in the fund, for those who stay invested until the maturity of the scheme. 

  • Liquidity

While Fixed Maturity ETFs are designed to be held to maturity, there is no obligation to do so. Just as with any other ETF, they are traded on the stock exchange and can be sold at the current market value at any point during the holding period, should a need or opportunity arise. This offers a potential advantage over individual bonds which can be illiquid and therefore challenging to sell at short notice, if so required. 

  • Diversification2

Although Fixed Maturity ETFs focus on acommon maturity date, by holding a basket of bonds, this reduces concentration risk and may enhance portfolio resilience.

All in all, therefore, Fixed Maturity ETFs share many traits with single bonds, but they combine this with the benefits inherent to ETFs. And in the current market context they may offer an efficient means of locking in elevated yields1, while remaining flexible.

    Amundi’s Fixed Maturity ETF Range

    Amundi’s new suite of Fixed Maturity ETFs combines yield predictability with easy access to Euro government bonds. It includes single-country exposure to Germany and Italy as well as broader Eurozone coverage, the first of its kind on the European market4. Reflecting our commitment to providing ready-to-use, cost-effective solutions, all ETFs within the range come with ongoing charges of only 0.09%5.


    1. Capital not guaranteed
    2. Diversification does not guarantee a profit or protect against a loss 
    3. The yield to maturity is not guaranteed
    4. Source: Amundi ETF, as of 25/04/2024.
    5. Management fees refer to the management fees and other administrative or operating costs of the fund. For more information about all the costs of investing in the fund, please refer to its Key Information Document (KID). Transaction cost and commissions may occur when trading ETF.


    KNOWING YOUR RISK

    It is important for potential investors to evaluate the risks described below and in the fund’s Key Investor Information Document (“KIID”) and prospectus available on our website www.amundietf.com.
    CAPITAL AT RISK - ETFs are tracking instruments. Their risk profile is similar to a direct investment in the underlying index. Investors’ capital is fully at risk and investors may not get back the amount originally invested.
    UNDERLYING RISK - The underlying index of an ETF may be complex and volatile. For example, ETFs exposed to Emerging Markets carry a greater risk of potential loss than investment in Developed Markets as they are exposed to a wide range of unpredictable Emerging Market risks.
    REPLICATION RISK - The fund’s objectives might not be reached due to unexpected events on the underlying markets which will impact the index calculation and the efficient fund replication.
    COUNTERPARTY RISK - Investors are exposed to risks resulting from the use of an OTC swap (over-the-counter) or securities lending with the respective counterparty(-ies). Counterparty(-ies) are credit institution(s) whose name(s) can be found on the fund’s website amundietf.com. In line with the UCITS guidelines, the exposure to the counterparty cannot exceed 10% of the total assets of the fund. 
    CURRENCY RISK – An ETF may be exposed to currency risk if the ETF is denominated in a currency different to that of the underlying index securities it is tracking. This means that exchange rate fluctuations could have a negative or positive effect on returns.
    LIQUIDITY RISK – There is a risk associated with the markets to which the ETF is exposed. The price and the value of investments are linked to the liquidity risk of the underlying index components. Investments can go up or down. In addition, on the secondary market liquidity is provided by registered market makers on the respective stock exchange where the ETF is listed. On exchange, liquidity may be limited as a result of a suspension in the underlying market represented by the underlying index tracked by the ETF; a failure in the systems of one of the relevant stock exchanges, or other market-maker systems; or an abnormal trading situation or event.
    VOLATILITY RISK – The ETF is exposed to changes in the volatility patterns of the underlying index relevant markets. The ETF value can change rapidly and unpredictably, and potentially move in a large magnitude, up or down.
    CONCENTRATION RISK – Thematic ETFs select stocks or bonds for their portfolio from the original benchmark index. Where selection rules are extensive, it can lead to a more concentrated portfolio where risk is spread over fewer stocks than the original benchmark.

    IMPORTANT INFORMATION
    This material is solely for the attention of professional and eligible counterparties, as defined in Directive MIF 2014/65/UE of the European Parliament (where relevant, as implemented into UK law) acting solely and exclusively on their own account. It is not directed at retail clients. In Switzerland, it is solely for the attention of qualified investors within the meaning of Article 10 paragraph 3 a), b), c) and d) of the Federal Act on Collective Investment Scheme of June 23, 2006.
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    - Multi Units Luxembourg, RCS B115129 and Lyxor Index Fund, RCS B117500, both Luxembourg SICAV located 9, rue de Bitbourg, L-1273 Luxembourg, and managed by Amundi Asset Management
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