Minnesota Blue's Asset Manager Starts ETF for Insurers

An asset manager that oversees investments for Blue Cross & Blue Shield of Minnesota is starting an exchange-traded fund for insurers and other treasurers wanting to streamline their cash management.

The ETF, which will trade under the ticker AWTM, will be actively run by Aware Asset Management, which manages $1.6 billion, according to a press release from the company. The Aware Ultra-Short Duration Enhanced Income ETF, which costs $2.30 for every $1,000 invested, is designed to be a liquid, cost-effective alternative to earnings credits, commercial paper and money-market funds, the statement said.

(Related: U.S. Life Insurers Are Still Shifting Toward Harder-to-Sell Assets: S&P)

“We focus on preserving investment capital and maintaining that appropriate liquidity,” John Kaprich, one of the new fund’s managers, said by phone. “Our job is to ensure that claims are met.” Aware and Minnesota’s Blue Cross are both units of Aware Integrated Inc., which does business as Stella.

To do so, the fund will first need to overcome insurers’ reluctance to embrace ETFs, despite changes to the National Association of Insurance Commissioners’ accounting guidelines a year ago that reduced capital requirements for debt ETFs. This fund will look “for treatment equivalent to that of investment-grade securities,” according to its prospectus.

AWTM will look to woo insurers with an effective duration of less than a year and a yield of between 75 and 100 basis points more than three-month T-bills, the company’s statement said. That will likely mean owning Treasuries for liquidity alongside corporate and structured notes, including mortgage-and asset-backed securities, according to Kaprich.