Active Bond ETF Launches

September 18, 2018

Today Anfield Capital launched an actively managed “go anywhere” bond fund. The Anfield Universal Fixed Income ETF (AFIF) is a sister fund to a mutual fund offered by Anfield for the past five years. The two products will be managed as similarly as possible given their differing wrappers, according to Anfield.

AFIF’s expense ratio is capped at 0.95%. The fund is listed on the Cboe exchange. Cboe Global Markets is the parent company of ETF.com.

The fund can invest in a wide swathe of fixed-income vehicles and securities, as well as common stocks that pay dividends and different types of derivatives. According to its prospectus, it has no target duration or maturity.

The document also notes the fund uses top-down macroeconomic analysis and a bottom-up approach regarding individual securities.

AFIF is advised by Regents Park Funds, with Anfield Capital Management serving as subadvisor. Anfield was founded by a team of portfolio managers that worked together for many years at PIMCO. David Young, CEO of Anfield, notes the team was an integral part of PIMCO’s move into the unconstrained bond fund space.

In addition to AFIF, Anfield also offers the Anfield Capital Diversified Alternatives ETF (DALT), an ETF of ETFs that is also actively managed.

Inner Workings

According to Young, the unconstrained bond fund space suffers from a lack of definition.

“Up to now, unconstrained, in our opinion, has been translated to be hedge-fundlike,” he said.  “You tend to get funds that have higher volatility; they tend to be thematic-investment-based, with a lot of global macro fixed-income intonations.”

Young adds that, with that added volatility, such products don’t really seem like bond funds, and points out that such funds tend to be dominated by derivatives, with “a sprinkling of bonds on top.”

Anfield takes a somewhat different course than many unconstrained bond managers. First, it determines the ideal strategy, and then it takes a bottom-up approach, selecting individual securities based on their fundamentals, and then referring back to the model to see how well the chosen securities fit with it. Derivatives are used to tweak exposures after the fact, rather than representing the bulk of the portfolio, Young says.

“We build the portfolio with a granular construction, bond by bond,” he noted. “We build with bonds and then we finish with derivatives.”

Young describes the end result as resembling a “flexible core bond fund.”

While AFIF was partly designed to meet market needs and demands, the fund’s creation was also partially driven by a large ETF-only RIA firm that approached Anfield about developing the product, Young says. That suggests the fund will have healthy assets from the get-go.

Contact Heather Bell at [email protected]

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