Daily ETF Watch: DoubleLine SPDRs Debut

Two companions to TOTL have launched.

Reviewed by: Heather Bell
Edited by: Heather Bell

State Street Global Advisors has launched two more actively managed ETFs today on the Bats exchange; Bats is also the owner of ETF.com. The funds are subadvised by DoubleLine Capital, the firm founded by Jeffrey Gundlach.

EM Debt Fund

The SPDR DoubleLine Emerging Markets Fixed Income ETF (EMTL) invests in fixed-income securities issued in countries identified as emerging or developing by supranational organizations or by major index providers. It comes with an expense ratio of 0.65%.

The fund’s prospectus doesn’t mention a lot of hard and fast rules—it can invest in a wide range of fixed-income vehicles and credit qualities, though it generally keeps subinvestment-grade debt to 20% or less in the portfolio. EMTL targets a weighted average effective duration between two and eight years, but the prospectus warns that it could deviate from that range on occasion.

The portfolio will typically include issues from at least five emerging market countries and limit the weight of any single country to 20%. EMTL’s prospectus notes that when looking at different countries, the fund’s manager considers political, market and economic factors.

Low-Duration Fund

The other fund, the SPDR DoubleLine Short Duration Total Return Tactical ETF (STOT), includes Gundlach among its managers and will invest mainly in U.S. debt with no real limits on type or credit quality. It can even invest in other exchange-traded funds. STOT charges an expense ratio of 0.45%.

However, STOT’s managers will seek to invest more than 25% of the portfolio in mortgage-backed securities, the prospectus said. Up to 20% of the portfolio can be invested in junk bonds, and up to 15% can be invested in debt that is not denominated in U.S. dollars. That said, the fund can gain more foreign exposure as long as it is in the form of USD-denominated securities, and up to 20% of the portfolio’s assets can be invested in securities meaningfully associated with emerging markets in terms of domicile, assets or revenues.

The fund’s target duration is just one to three years in an effort to limit the fund’s interest-rate risk, but the prospectus acknowledges that STOT could deviate from that range significantly at times.

The prospectus also notes that STOT’s managers use a top-down approach for sector selection and a bottom-up approach to select specific securities. The fund’s managers also look to control the fund’s risk by considering the selection of securities in their respective sectors, how the sectors compare with each other, the yield curve and interest-rate movements.

State Street teamed up with DoubleLine on the most successful ETF debut of 2015, the launch of the SPDR DoubleLine Total Return Tactical ETF (TOTL | C), which is managed by Gundlach. TOTL currently has some $2.5 billion in assets under management.

First Trust Rolls Out RiverFront Funds
First Trust has launched three actively managed funds on the Nasdaq stock exchange that target different slices of non-U.S. markets and are subadvised by RiverFront Investment Group. Each one comes with an expense ratio of 0.83%.

The ETFs are as follows:

  • First Trust RiverFront Dynamic Developed International ETF (RFDI)
  • First Trust RiverFront Dynamic Asia Pacific ETF (RFAP)
  • First Trust RiverFront Dynamic Europe ETF (RFEU)

The funds’ strategy primarily targets stocks with exposure to value, quality and momentum. RiverFront scores the stocks based on that exposure and uses an optimization process to create a portfolio with maximum exposure to the highest-scoring stocks. The prospectus notes that market capitalization and trading volume are also taken into consideration.

The funds also have a dynamic currency hedging strategy that can range from 0 to 100% hedged, depending on a variety of quantitative and qualitative criteria, from interest rates to guidance from central bankers, the prospectus said.

Contact Heather Bell at [email protected].

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.