F/m Investments Launches Two ETFs To Tackle Tax Challenges With Dividend Rotation Strategy

F/m Investments has teamed up with Compoundr LLC to launch two new fixed-income ETFs that seek to mitigate the tax sting of dividend payments, an issue often overlooked in conventional bond investing. The introduction of the two funds also marks the launch of the F/m Compoundr ETFs Series of funds.

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How Dividend Rotation Can Minimize Tax Burdens

The F/m Compoundr High Yield Bond ETF CPHY and F/m Compoundr U.S. Aggregate Bond ETF CPAG, both listed on Nasdaq, employ rules-based “dividend rotation” techniques linked with the recently designed Nasdaq Compoundr Indexes. The strategy entails rotating into similar holdings before dividend ex-dates, aiming to substitute recurring taxable distributions with delayed capital gains.

"This is exactly the kind of real-world challenge our team is built to solve," said Alexander Morris, CEO of F/m Investments. "With Compoundr, we're targeting one of the most underappreciated frictions in the market: dividends that some investors would rather avoid."

Are These ETFs The Future Of Fixed Income?

For trust investors or other tax-conscious accounts, dividends have been known to be more trouble than they’re worth at times, said Compoundr Partner David Cohen. President of F/m, David Littleton, noted that high-yield and investment-grade bonds were rational places to begin, but sees potential for the strategy to branch out into other asset classes.

The ETFs rebalance portfolios each month and are guided by F/m’s fixed-income team — John Han, Marcin Zdunek, and Kevin Conrath for CPHY, and Peter Baden, Zdunek, and Conrath for CPAG.

Two Innovative Funds Meet Growing Tax-Efficient Demand

The funds debut at a time when there is increased need for tax-efficient strategies, but investors should be cautious of risks involved in high-yield debt, interest rate movement, lack of liquidity, and the newness of the funds to the market.

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