Timothy Plan Fixed Income ETF (TPFI)

The Timothy Plan Fixed Income ETF (ticker: TPFI) is an exchange-traded fund that holds a diversified portfolio of U.S. investment-grade bonds — debt instruments issued by corporations and municipalities — and applies the same Christian values-based screening to the issuers as the Timothy Plan applies across its equity products.

The fixed-income foundation

TPFI’s core holding is investment-grade bonds. Investment-grade means the bonds are rated BBB or higher by major rating agencies (Standard & Poor’s, Moody’s), indicating a relatively low default risk. The portfolio typically holds a mix of corporate bonds (debt issued by public companies) and municipal bonds (debt issued by state and local governments). By mixing these bond types, the fund achieves diversification across issuers and risk profiles.

Investment-grade bonds trade on the secondary market, and their prices move in response to interest-rate changes, credit-quality shifts in issuers, and supply-and-demand dynamics. When interest rates rise, bond prices fall (and vice versa). When the market becomes concerned about a particular issuer’s creditworthiness, its bonds fall in value. TPFI shareholders experience these price changes in the form of fluctuating net asset value, and they receive regular coupon payments — the periodic interest payments the bonds themselves pay out.

The values-based screening layer

Unlike a plain bond-index fund that would hold any investment-grade bond that meets certain liquidity and size thresholds, TPFI screens issuers through the Christian values lens that the Timothy Plan applies across its product line. Bonds issued by companies or municipalities are excluded if the issuer is involved in industries or practices deemed inconsistent with conservative Christian principles.

For corporate issuers, this means bonds from companies in alcohol, tobacco, gambling, contraceptive manufacturing, pornography, certain weapons sectors, and some healthcare practices are excluded. For municipal bonds, the screen may exclude issuers in certain industries or with certain disclosed practices. The specific screening criteria are detailed in the fund’s prospectus.

The practical effect is that TPFI holds the investment-grade bonds of issuers that pass the values screen — companies and municipalities that are not involved in excluded sectors or practices. This is a meaningful constraint: it eliminates entire sectors from the opportunity set, which shapes portfolio construction and can affect diversification.

Corporate bonds in the portfolio

The corporate-bond segment of TPFI includes debt issued by large, creditworthy companies in industries that clear the values screen: healthcare, technology, industrials, consumer staples, financials (excluding those with controversial practices), and utilities. These bonds typically have maturity dates ranging from 2 to 10 years out. The fund seeks to maintain a broad maturity profile so the portfolio is not concentrated in, say, just short-term or just long-term debt.

Corporate bonds carry credit risk — the risk that the issuer will struggle to pay interest or principal on time. A large, profitable company with strong cash flow presents low credit risk; a smaller or more cyclical company presents higher risk. TPFI mitigates credit risk by limiting itself to investment-grade bonds and by diversifying across many issuers.

Corporate bonds also carry interest-rate risk. When interest rates rise, existing bonds (with lower coupons) fall in value because new bonds with higher coupons become more attractive. This price decline is mechanical and temporary if the bond is held to maturity (the issuer still pays the full face value), but for investors who need to sell before maturity, rising rates mean losses.

Municipal bonds in the portfolio

Municipal bonds are issued by state and local governments to finance infrastructure, schools, hospitals, and public facilities. Many municipal bonds carry a federal tax exemption — the interest is not taxed at the federal level — which makes them attractive to investors in high tax brackets. TPFI’s municipal-bond segment follows the same credit-quality standard (investment-grade) and values-based screening as its corporate portion.

Municipal bonds present their own risks. Some municipalities face fiscal stress due to underfunded pensions, declining tax bases, or mismanagement. Default is rare among investment-grade munis, but it does happen. TPFI spreads risk across many municipalities to reduce concentration. The fund may also tilt toward revenue bonds (backed by specific government revenues like utility fees or tolls) versus general-obligation bonds (backed by the government’s full taxing power), depending on the manager’s assessment of credit quality.

The tax-exemption feature of municipal bonds is meaningful for taxable-account investors but irrelevant in tax-advantaged accounts like 401(k)s or IRAs. TPFI is a less effective holding in a retirement account because the tax benefit is lost.

The income profile and distribution structure

TPFI generates income through two channels: coupon payments from the underlying bonds and any capital gains from selling bonds at higher prices than their purchase cost (less common in a stable interest-rate environment). Most of this income is distributed regularly to shareholders, typically quarterly or monthly depending on the fund’s policy.

The distribution yield — the annual payout expressed as a percentage of the fund’s value — depends on prevailing interest rates and credit spreads. In an environment of high interest rates, bond coupons are high, and distributions are large. In an environment of low rates (and compressed credit spreads), distributions are smaller. Investors should not expect a fixed distribution; it varies with the underlying bond yields and the fund’s trading activity.

The distributions include both ordinary income (the coupon interest) and potentially some capital gains if the fund sells bonds profitably. Investors in taxable accounts should understand the tax character of distributions; municipal-bond interest may arrive tax-free, while corporate-bond interest is fully taxable. The prospectus details the recent distribution composition.

Duration and interest-rate sensitivity

A key metric for any bond fund is duration — a measure of how much the fund’s price will move if interest rates change. A fund with high duration is more sensitive to rate moves (more volatile). A fund with low duration is less sensitive.

TPFI’s duration depends on its maturity profile. If it holds mostly short-term bonds (1–3 years), it has low duration and is less volatile but generates lower yields. If it holds mostly long-term bonds (7–10+ years), it has higher duration, generates higher yields, but experiences larger price swings when rates move. Most intermediate-maturity bond funds aim for a duration in the 4–7 range, balancing yield and stability.

The fund’s prospectus or fact sheet specifies the current average duration, which clarifies the interest-rate risk. Investors should review this before investing and consider whether they are comfortable with the volatility it implies.

Risks and limitations

The primary risk is interest-rate risk. If rates rise significantly, the value of TPFI’s bonds falls. An investor who needs to sell when rates are rising will realize losses. This is not a permanent loss if the bond is held to maturity, but it is a real loss at the time of sale.

Credit risk is secondary but real. An issuer of a bond held by TPFI could face financial stress and eventually default. Investment-grade screening reduces this risk but does not eliminate it. A recession could push several issuers into financial distress simultaneously, widening spreads and depressing bond prices.

Liquidity risk is typically low for this fund, as investment-grade bonds are relatively liquid and the fund itself trades as an ETF. However, in a market panic or in severely stressed credit conditions, liquidity can evaporate even for investment-grade bonds.

Finally, values-based screening constrains the opportunity set. By excluding entire sectors, the fund may miss some of the highest-quality bonds or may hold bonds from issuers that would not appear in a plain investment-grade-bond fund. This is the intended effect and aligns with the fund’s ethical mission, but it is a tradeoff: diversification and yield opportunity are reduced in exchange for values alignment.

Researching TPFI

A reader studying TPFI should obtain the prospectus and fact sheet from Timothy Plan, which specify the current holdings, the average duration, the expense ratio, and the recent distribution history. Review the list of corporate and municipal issuers to see which sectors and geographies dominate.

Assess the current yield environment by comparing TPFI’s distribution yield against that of a plain investment-grade-bond fund or a broad fixed-income index. If TPFI’s yield is meaningfully lower, the values-based screening is reducing income; if it is comparable, the screening has had little yield impact.

Check the fund’s rolling returns over 1-, 3-, and 5-year periods against a broad bond-index fund or against a peer fixed-income fund to see whether the values screening is a headwind or a non-factor in performance.

For taxable-account investors, understand the tax character of recent distributions; if TPFI holds a high proportion of taxable bonds, the full distribution is federally taxable. If it holds a substantial municipal-bond component, much of the distribution may be tax-free. Confirm how the fund’s tax efficiency aligns with your account structure.

Finally, review the specific issuers excluded by the values screen and confirm that the exclusions align with your own principles. Different values-based funds screen differently; TPFI’s specifics matter.