2 New Active Bond ETFs Debut

Thursday saw the launch of a new senior loan ETF and an ultra-short bond ETF.

Reviewed by: Lara Crigger
Edited by: Lara Crigger

On Thursday, two new actively managed fixed income ETFs launched, each designed to provide investors current income: the Virtus Seix Senior Loan ETF and the Principal Ultra-Short Active Income ETF.

Both funds will trade on the NYSE Arca.

New Take On Senior Loans

The Virtus Seix Senior Loan ETF, trading under the ticker "SEIX" with an expense ratio of 0.57%, would seek to provide investors a high level of current income by investing at least 80% of its assets in a combination of first- and second-lien senior floating rate loans.

Senior loans are the highest-priority loans available to corporate borrowers. Should the borrower default, this debt must be repaid first. First-lien loans must be paid before second-lien ones.

The loans in which SEIX will invest generally will possess floating coupon rates tied to some benchmark lending rate (such as the prime lending rate offered by U.S. banks) or a specified floor, whichever is higher. According to the prospectus, the debt generally will be rated below investment grade or unrated.

In addition, SEIX may hold junior debt, junk bonds and asset-backed securities, such as special purpose trusts that invest in bank loans. Up to 10% of the fund’s assets may be put toward "revolvers," or open loans for a specific amount that are continually offered to a borrower. 

Another 20% of SEIX's portfolio may include non-U.S. senior loans, though no more than 5% of the ETF's assets may be put toward loans denominated in foreign currency.

SEIX will be subadvised by Seix Investment Advisors LLC, which will select and manage investments for the portfolio. This is its first ETF partnership with Virtus.

Active Ultra Short Portfolio

Meanwhile, the Principal Ultra-Short Active Income ETF, trading under the ticker "USI," will invest at least 80% of its assets in investment grade bonds and other debt securities, as rated by S&P Global Ratings or Moody's.

The fund will seek to maintain both an average effective maturity of three years or less, and an average portfolio duration of one year or less.

To achieve this, USI may hold both fixed and floating rate securities, as well as U.S. and foreign debt. It will invest at least 25% of its assets in debt from the financial services sector, including banking, insurance and commercial finance.

The fund will be managed by Principal Global Advisors, an indirect subsidiary of Principal Financial Group.

USI has a management fee of 0.18%.

Contact Lara Crigger at [email protected]

Lara Crigger is a former staff writer for etf.com and ETF Report.