Displaying items by tag: active etfs

American Century Investments recently launched its newest active ETF, the American Century Short Duration Strategic Income ETF (SDSI). The fund, which now trades on the NASDAQ, will seek to generate attractive yield by investing across multiple fixed-income market segments that maintain a short-duration focus. The fund invests in both investment-grade and high-yield, non-money market debt securities. This could include corporate bonds and notes, government securities, and securities backed by mortgages or other assets. SDSI is a transparent active ETF with an expense ratio of 0.32%. The fund management team includes Jason Greenblath, Charles Tan, Jeffrey Houston, CFA, and Peter Van Gelderen. Ed Rosenberg, American Century's head of ETFs, noted that "SDSI expands our existing Short Duration Strategic Income capabilities to an actively managed ETF. The Short Duration Strategic Income ETF seeks to complement an investor's core bond holdings with high current income, broad diversification, and the potential to mitigate the impact of rising rates."

Finsum: American Century continues to build up its active ETF lineup with the addition of the American Century Short Duration Strategic Income ETF.

In a recent article in FT Adviser, Lumin Wealth Investment Manager Elliott Frost wondered how much alpha left is in active fixed income. Frost believes that a fixed income allocation should include a strategic mix of active and passive management. He notes that active fixed-income managers have generally outperformed passive strategies in the fixed-income space due to several reasons. The first is that companies with the most debt typically make up the largest component of a fixed income market index, leaving the portfolio more exposed to unfavorable changes in credit. Another reason is the lack of risk mitigation. Passive managers cannot “dial up or dial down risk.” However, he noted that the alpha generated by active managers has been to some degree, due to a long-term overweight on credit. Frost believes that if we account for a manager’s credit exposure, fees, and other factor exposures such as volatility, there might not be much alpha left. This is why he recommends not putting “all your eggs in one basket” and incorporating a passive fixed index into a portfolio for cheap access to a liquid market.

Finsum: Lumin Wealth’s Elliott Frost wonders if there is much alpha left in active fixed income once a manager’s credit exposure, fees, and volatility are accounted for.

Invesco, which is the fourth-largest U.S. ETF firm based on total assets, recently filed for four actively managed fixed-income ETFs. The fund firm is currently best known for its index-based funds and custom index strategies. However, the company is looking to branch out by adding actively managed fixed income to its stable. In a series of regulatory filings, the firm filed for four ETFs, including the Invesco High Yield Select ETF, the Invesco Municipal Strategic Income ETF, the Invesco Short Duration Bond ETF, and the Invesco CLO Floating Rate Note ETF. The Invesco High Yield Select ETF will be run by a team of managers led by Niklas Nordenfelt who currently leads Invesco’s High Yield fixed income team and recently took over the Invesco High Yield mutual fund. The Invesco Municipal Strategic Income ETF will invest 50%–65% of its assets in low- to medium-quality municipal securities, which the company defines as bonds rated BBB. The Invesco Short Duration Bond ETF will utilize the Bloomberg 1-3 Year Government/Credit Index as a reference in designing the portfolio. The Invesco CLO Floating Rate Note ETF will primarily invest in collateralized loan obligations that have limited interest rate sensitivity and strong credit profiles.

Finsum:Invesco is looking to expand its ETF product line with the registration of four actively managed bond ETFs.

AllianceBernstein recently announced the launch of its first set of active exchange-traded funds. The funds, which trade on the NYSE, include the AB Ultra-Short Income ETF (YEAR) and the AB Tax-Aware Short Duration Municipal ETF (TAFI). YEAR is an actively managed ETF that aims to deliver higher levels of yield relative to cash or cash-like investments while aiming for capital preservation in all market cycles. TAFI is an actively managed municipal bond strategy that offers municipal bond investors a distinct complement to their core allocations providing the opportunity to help maximize after-tax income and returns using shorter maturity bonds and opportunistic exposure to treasuries and taxable bonds. The launch comes only seven months after the firm announced plans to build a global ETF business under Noel Archard, who joined the company in February as global head of ETFs and portfolio solutions. Archard commented on the launch, "Today's ETF launch is an exciting achievement for our firm. ETFs have evolved into an important execution tool across asset classes, and amidst the recent market volatility, we feel it is critical to offer our clients diversity and efficiency.”

Finsum:AllianceBernstein launched two active fixed ETFs as part of its plans to build a global ETF business.

The predominant sentiment in financial markets is that active funds have an edge during volatile periods because picks are more apparent and therefore easier to execute. However, according to the Euro Securities and Market Authority, active funds didn’t outperform passive funds during the critical stressed market conditions from February 19th to June 30th, 2020. This full cycle in financial markets didn’t give active funds an advantage and actually underperformed by 6.6% annualized in that period. This research backs up previous reports by morningstar that active funds didn’t outperform during high volatility Covid-19.

Finsum: Covid-19’s cycle was the K-shaped recovery Economists dream of, so this isn’t the nail in the coffin for active management.