Accretive Asset Management Publishes Commentary on Design Flaws of Traditional Index-Based Bond ETFs

Sept. 16, 2010 - PRLog -- Naperville, IL In the article, Mr. Patterson argues that rules of construction for most traditional fixed income indices force traditional index-based bond ETFs to engage in “excessive and needless portfolio turnover” that generates unnecessary transaction costs that negatively impact performance.  Mr. Patterson argues that the design flaws of traditional index-based ETFs are one of the reasons that individual bonds remain popular among sophisticated financial advisors seeking to allocate client assets to fixed income investments.

The commentary can be accessed via http://news.morningstar.com/articlenet/SubmissionsArticle.aspx?submissionid=101320.xml

Accretive Asset Management LLC recently launched a series of bond indices designed to overcome the shortcomings of traditional bond indices and offer a diversified alternative to investing in individual bonds. Each BulletShares® Index tracks a group of debt securities with the same maturity and has been designed to serve as the basis for an individual mutual fund or ETF. The resulting mutual fund or ETF has a cash flow profile and return characteristics similar to that of an individual held-to-maturity bond while providing exposure to a diversified basket of debt securities. Each BulletShares® Index is part of a larger family of BulletShares® Indices, with each index in a given family of indices providing targeted exposure to a specific year of maturity.

Unlike traditional fixed income indices, BulletShares® Indices seek to minimize turnover by holding bonds until they mature. Additionally, each BulletShares® Index has a designated year of maturity, at the conclusion of which the index is terminated.  Investors in BulletShares®-based products thereby receive the full complement of benefits derived from holding individual bonds, including the return of investment capital upon termination that can be used to fund lifestyle needs or reinvested.

“We created BulletShares® Indices with the objective of providing financial advisors with a set of tools they can use to create customized fixed income solutions for clients without sacrificing the diversification and liquidity benefits provided by bond ETFs,” said Darrin DeCosta, Head of Product Development for Accretive Asset Management.

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About Accretive Asset Management
Accretive Asset Management (AAM) is the sponsor of the BulletShares® family of fixed income indices. These indices serve as the basis for investment products that combine the best attributes of investing in individual bonds and bond funds. For more info: www.bulletshares.com

AAM was formed in 2008 to create products that help financial advisors better serve their clients. Through creative thinking informed by a strategic understanding of the marketplace, AAM conceives and develops innovative product concepts and designs marketing and branding strategies to commercialize its innovations.