The ETF industry is welcoming four new ETFs into existence today, with launches from First Trust, IndexIQ, Global X and Tortoise.
First Trust Debuts Bond ETF
First Trust has rolled out an actively managed fixed-income ETF that will be subadvised by TCW Investment Management. The First Trust TCW Opportunistic Fixed Income ETF (FIXD) can invest in a wide range of debt securities of any credit quality from across the globe, with its subadvisor targeting markets that it sees as undervalued.
Although there are no requirements regarding the fund’s average maturity, the subadvisor generally seeks to maintain an average portfolio duration that is within one year of that of the Bloomberg Barclays U.S. Aggregate Index, the prospectus said.
FIXD comes with an expense ratio of 0.55% and is listed on the Nasdaq stock exchange.
Ryan Issakainen, First Trust's senior vice president and ETF strategist, notes that the fund will be managed by an all-star team that has been nominated for Morningstar’s Manager of the Year award nine times and that has been working together some 25 years. First Trust was very impressed by how TCW has defined and developed its process over the years, Issakainen said.
“I think their approach is one that is very focused on managing risk,” he added, describing the firm’s approach as value-driven and team-driven. The fund will use a bottom-up security selection process and engage in sector rotation strategies.
IndexIQ Targets Fixed Income With Smart-Beta Strategy
IndexIQ has also launched a fixed-income ETF, but unlike FIXD, it tracks an index. The IQ S&P High Yield Low Volatility Bond ETF (HYLV) tracks a benchmark derived from the S&P U.S. High Yield Corporate Bond Index.
HYLV’s methodology ranks the components of the parent index based on marginal contribution to risk, an indicator of credit risk, and selects the bottom half, weighting the holdings by market value. The index typically has 400-500 components.
The fund is subadvised by MacKay Shields, a well-known fixed-income manager. IndexIQ Chief Investment Officer Salvatore Bruno noted that, despite being an index fund, HYLV would benefit from MacKay Shields’ knowledge regarding fixed income when it came to minimizing tracking error and implementing trades, among other areas.
“We’re giving investors and advisors tools that will help them add income generation potential to their portfolios in what is still a historically low rate environment, while addressing the concerns about volatility that often accompany high-yield exposures,” said Jae Yoon, New York Life Investment Management’s senior managing director and chief investment officer.
IndexIQ has noted that the launch of HYLV is a continuation of the fixed-income theme that was started when the firm rolled out the momentum-driven IQ Enhanced Core Bond U.S. ETF (AGGE) and the IQ Enhanced Core Plus Bond U.S. ETF (AGGP).
“They’re in keeping with our objective of trying to make the core portions of the portfolio more efficient and smarter,” said IndexIQ's Bruno.
HYLV carries an expense ratio of 0.40% and is listed on the NYSE Arca.