BNP Paribas Asset Management (BNPP AM) has announced the listing of three fixed maturity ETFs on Euronext Paris and Xetra (with Borsa Italiana to come) as well as the launch of two fixed maturity active funds in May this year.
The firm writes that Fixed Maturity Plans (FMPs) are diversified portfolios composed of bonds with similar maturity dates and possibly other debt securities. They are designed to provide investors visibility on the estimated yield to maturity. The portfolio typically has a short to medium-term maturity such as three or five years, depending on the investment horizon.
Common features across BNPP AM’s active and passive fixed maturity funds are:
Expose an actively or passively managed portfolio to numerous bonds with similar maturity dates ensuring diversification across issuers, sectors, ratings, and yield to maturity
Follow the life cycle of a single bond, provide regular interest payment and distribute the final payout at maturity
Daily liquidity
Integration of BNPP AM’s ESG methodology with an SI commitment ≥ 30 per cent
EU SFDR Article 8.
Pieter Oyens, Global Head of Marketing at BNP Paribas Asset Management, says: “With interest rates at their current levels, investors are looking for ways to lock in those rates. Fixed Maturity Products can be an excellent way to do this as they give access to a diversified portfolio of bonds which are maturing at a similar point in time and before the product’s maturity date. Through FMPs they also enjoy regular income and a predictable total return, assuming they stay until maturity and subject to any credit events.”
Characteristics of BNPP AM’s three fixed maturity ETFs in the Active Beta fixed income range:
Three maturity dates available: December 2027, December 2029 and December 2032
Euro-denominated investment-grade (IG) bonds
Tradeable throughout the day just like any ETF until maturity
Positions in individual issuers capped at 3 per cent each; final year using uncapped government bond exposure for cash management
Benchmarks: Bloomberg Euro Corporate indices with December 2027/2029/2032 maturity dates
Replication method: physical, with no securities lending.
Lorraine Sereyjol-Garros, Global Head of ETF and Index Solutions Business Development, says: “This new generation of fixed maturity ETFs should meet specific market demands for sustainable, diversified, liquid and transparent investment solutions with predictable outcomes. Fixed Maturity ETFs can help mitigate reinvestment risk since investors know the duration of their investment and can plan accordingly. Offering a new investment solution that combines fixed maturity with sustainability and low Tracking Error can differentiate this new range of ETFs from traditional options, potentially attracting both retail and institutional clients. It is the perfect complement to the existing range that answers our clients’ needs on sustainable investments, including on Fixed Income”.
Characteristics of BNPP AM’s fixed maturity active funds:
The first two funds of BNPP AM active FMPs
Two maturity dates available: June 2027, June 2029
Euro aggregate bond universe (during investment period):
Active management to seize opportunities for additional spread and manage downside risks using fixed and floating rate bonds and active allocations in different sectors, geography, issuers, etc.
Diversification within a single portfolio (around 100 securities each)
Minimum 75 per cent IG / maximum 25 per cent in high-yield (HY)
Developed markets – only OECD countries (no emerging markets)
Only euro-denominated instruments
No securities with maturities longer than the fund’s maturity date + six months.
Daily NAV (net asset value) to buy or sell: a distinctive feature of this generation of active FMPs: investors can buy (and sell) any day, up to six months before maturity. The fund applies swing pricing.
Portfolio to be monitored against the closest OAT, hence offering yield visibility at anytime.
A minimum 10 per cent will be invested in green, social and sustainable bonds.
Peter Benschop, Euro Bond Fund Manager: “Our new generation Fixed Maturity Plans aim to capture yield, to protect the investor from downside risks, and to generate incremental returns by actively managing the funds. The current rate environment is very favourable for investors seeking to lock in attractive yields for the next few years. With these new products, we offer a solution to achieve this in a risk-controlled manner. Credit selection and monitoring is key to avoid exposure to potential negative credit events. That is why fundamental credit research forms the basis of our rigorous investment process. Another plus of the new generation FMPs is the added flexibility of active management. It enables us to seize opportunities for additional return and to adjust the overall risk level of the funds in changing market conditions.”
