A recent filing from First Trust outlines plans for an actively managed “go anywhere” fixed-income fund that will be managed by TCW Investment Management Company. The First Trust TCW Unconstrained Plus Bond ETF will look to achieve the maximum long-term total return possible, according to the filing.
“Unconstrained” in this case means the fund can invest in any type of fixed-income security and any credit quality. However, there are some limits: The ETF cannot invest more than 70% of its portfolio in junk bonds, while emerging market securities and issues denominated in non-U.S. currencies are limited to 60% and 50% of the portfolio, respectively. Plus, the fund will target an average portfolio duration of 0-10 years. Those requirements still leave a lot of leeway.
TCW, led by Chief Investment Officer Tad Rivelle, will subadvise the fund, relying on its long-term economic outlook to position the fund in terms of duration, yield curve and sector designation, the prospectus said. The firm will also leverage bottom-up research to target fixed-income issues that are undervalued or likely to outperform.
The largest fund in the space is the SPDR DoubleLine Total Return Tactical ETF (TOTL), which is subadvised by Jeffrey Gundlach’s DoubleLine Capital. The $3.4 billion fund does not explicitly market itself as an unconstrained fund, but the wide investment latitude described in its prospectus puts it on similar footing. Notably, TOTL cannot invest more than 25% of its portfolio in junk bonds.
The filing indicated the First Trust fund will list on the NYSE Arca, but it did not include a ticker or expense ratio.
Contact Heather Bell at [email protected]