Invesco waives management fee for floating-rate note index ETF

Investment firm expands access to strategy that helps lower portfolio risk and gain from rising-rate environment

Invesco waives management fee for floating-rate note index ETF

Invesco Canada has announced that the whole 0.20% management fee on its Invesco 1-3 Year Laddered Floating Rate Note Index ETF (PFL) will be waived until at least until August 31, 2023.

"Our clients are looking for ETF solutions like PFL that offer intraday liquidity and have low sensitivity to the rising interest-rate environment relative to the overall Canadian broad bond market,” Pat Chiefalo, Senior Vice President, Head ETFs & Index Strategies, Canada, said in a statement. “The strategy of PFL may offer an opportunity for investors to preserve capital by helping to reduce risk in portfolios while providing an attractive yield compared to holding cash."

PFL currently holds high-quality short-term investment-grade government, agencies, or provincial floating rate notes with ratings of AAA and AA2. Because the coupons paid these securities reset on a regular basis, rising interest rates result in increased coupon payments.

The laddering structure of PFL and the short duration of its underlying securities may also help reduce portfolio's interest-rate sensitivity in the current climate. That means as a fixed income ETF, PFL acts as a potential low-risk investment for investors while interest rates continue on their upward path.

PFL is designed to track the performance of the FTSE Canada 1-3 Year Laddered Floating Rate Note Index, as closely as is reasonable and before fees and expenses.

The index is made to track the performance of a laddered basket of investment-grade floating-rate notes issued by Canadian provinces, governments, and agencies over a period of one to three years.

In recent months, there has been a notable surge in buying of USD- and AUD-denominated floating-rate bonds.

Investors are drawn to this asset class because floating rate bonds provide them with the intrinsic benefits of bonds, such as consistent income and portfolio protection during market stress, as well as the upside potential of higher rates.