Displaying items by tag: active etfs
Blackrock expanded its fixed-income ETF lineup with the launch of the BlackRock AAA CLO ETF (CLOA). The fund, which was launched on January 10th, seeks to provide capital preservation and current income by investing principally in a portfolio composed of U.S. dollar-denominated AAA-rated collateralized loan obligations (CLOs). According to Investopedia, a CLO is a bundle of loans that are ranked below investment grade. While the underlying loans are rated below investment grade, most CLO tranches are typically rated investment grade due to credit enhancements and diversification. CLOs have historically only been available to institutional investors, but Janus Henderson launched the first CLO fund in an ETF wrapper in October 2020. That fund, the Janus Henderson AAA CLO ETF (JAAA) was clearly able to find an audience since the fund currently has close to $2 billion in assets under management. This bodes well for CLOA, which has an expense ratio of 0.20%, six basis points cheaper than JAAA. Investors have been attracted to CLOs due to low volatility, low downgrade risk, and low correlations with traditional fixed-income assets. CLOA currently has a weighted average coupon of 5.40 and a weighted average maturity of 4.24 years.
Finsum: Blackrock launched an AAA CLO ETF to take advantage of investor CLO interest due to low volatility, low downgrade risk, and low correlations with traditional fixed income.
According to Cerulli Associates' U.S. Exchange-Traded Fund Markets 2022 report, active fixed-income ETFs present a massive opportunity for firms. Daniil Shapiro, a director in product development at Cerulli, said in a recent interview that "a mix of factors" have combined to create the opportunity. He stated, "You have investors that are showing an increased preference for the ETF structure and they're increasingly open to accessing fixed income through the ETF structure. At the same time, you have interest rates that are increasing, which makes fixed income more attractive to investors." The report was based on polling Cerulli conducted in the third and fourth quarters of last year. It revealed that among advisers using ETFs, the portion using U.S. fixed-income ETFs has continued to increase, with 70% reporting such use in 2022, up from 63% in 2021. In addition, when ETF issuers were asked to gauge key drivers of fixed-income ETF flows over the next 24 months, greater adviser familiarity with fixed-income ETFs topped the list, cited by 66% of respondents. The second biggest driver was the increased use of fixed-income ETFs by institutions, which was cited by 55% of respondents.
Finsum:According to a new report by Cerulli Associates, active fixed-income ETFs present a massive opportunity for firms due to investors preferring the ETF structure and fixed income being more attractive with higher rates.
According to a post-viewer poll following a VettaFi active fixed-income webcast, financial advisors seemed to be warming up to having more actively managed bond ETFs in their client’s portfolios. After viewing the webcast Active Fixed-Income Answers to Tight Monetary Policy, half of the respondents said that they are very likely to increase their exposure to active ETF strategies in the future, while 37.5% said they are somewhat likely to do so. The poll also found that "56% said they were concerned that owning passive index-only ETFs left them too exposed to market conditions without forward-looking risk controls or the ability to pivot to make changes, with 44% saying they were ‘very concerned’.” Todd Rosenbluth, head of research at VettaFi had this to say about the results, “With the heightened market volatility of 2022 likely to persist into the new year, advisors are increasingly interested in ETFs where, rather than shifting to a more offensive or defensive stance, they can take advantage of the expertise of managers who can shift exposure based on the latest developments.” With ETF firms launching more actively managed funds amid market volatility and inflation, investors are looking to active management to help guide their portfolios.
Finsum:A recent poll by VettaFi found that more advisors are seeing the importance of active fixed income in their client portfolios.
Invesco continues to expand its ETF lineup with the launch of four new actively managed ETFs. The new fund offerings include the Invesco AAA CLO Floating Rate Note ETF (ICLO), the Invesco High Yield Select ETF (HIYS), the Invesco Municipal Strategic Income ETF (IMSI), and the Invesco Short Duration Bond ETF (ISDB). All four funds were launched last Friday and trade on the CBOE. ICLO, which has an expense ratio of 0.26%, invests in floating-rate note securities issued by collateralized loan obligations (CLOs) that are rated AAA or equivalent. HIYS invests in higher quality below investment grade fixed income securities, such as corporate bonds and convertible securities. The fund charges 0.48%. IMSI has an expense ratio of 0.39% and invests in municipal securities exempt from federal income taxes and in other instruments that have similar economic characteristics. ISDB invests in fixed-income securities such as high-yield bonds and other similar instruments and aims to maintain a portfolio maturity and duration between one and three years. The ETF charges 0.35%.
Finsum:Invesco bolsters its active stable of ETFs with the launch of four fixed-income ETFs that invest in CLOs, high-yield bonds, munis, and short-duration bonds.
Tidal Financial Group recently announced the launch of the Senior Secured Credit Opportunities ETF (SECD), its first actively managed credit ETF. The fund, which is managed by Gateway Credit Partners seeks to generate consistent income and preserve capital by investing in a combination of first-lien senior secured loans and secured bonds to businesses operating in North America. Gateway is a value-based credit manager that focuses on capturing fundamental and technical inefficiencies in the leveraged loan and high-yield bond market. The firm focuses on generating true alpha which they define as yield per turn of leverage significantly greater than their representative indices. It believes a “size arbitrage” exists in credit markets as rating agency models can over-emphasize size vs credit fundamentals. Tim Gramatovich founder of Gateway had this to say about the ETF launch, “At over $3 trillion, the US loan and high-yield bond markets offer investors a tremendous opportunity to generate yield. We believe SECD fills a much-needed gap in the actively managed corporate credit space particularly as it relates to the loan market.”
Finsum:Tidal Financial Group recently launched an actively managed credit ETF that aims to take advantage of higher yields in the loan market.