DoubleLine Capital, an investment manager with $134 billion in assets under management founded by Jeffrey Gundlach, entered the ETF space today with two very different actively managed funds, the DoubleLine Shiller CAPE U.S. Equities ETF (DCPE) and the DoubleLine Opportunistic Bond ETF (DBND).
The former comes with an expense ratio of 0.65%, while the latter charges 0.50%. Both funds list on the NYSE Arca.
Shiller CAPE Equity Strategy
DCPE is a nontransparent actively managed ETF that relies on Precidian’s ActiveShares model. Although actively managed, the ETF uses the Shiller Barclays CAPE US Sector TR USD Index as a guideline for selecting individual stocks.
Robert Shiller’s cyclically adjusted PE (CAPE) ratio incorporates earnings over a 10-year period rather than just 12 months, and the index associated with DCPE uses this metric to determine which sectors are truly undervalued. On a monthly basis, it selects the four most undervalued sector ETFs—after applying a momentum screen to avoid value traps—to include in its holdings, according to the fund prospectus.
However, actively managed DCPE uses the index as the basis for selecting individual securities rather than replicating the ETF-based index, with the objective of outperforming the S&P 500.
Jeffrey Sherman, who co-manages the fund with DoubleLine founder Gundlach, notes that since DCPE is not purely an index-tracking fund, its managers have the ability to maneuver and exercise discretion, which allows them to trade in a cost-effective and tax-efficient manner
Opportunistic Bond Fund
Meanwhile, DBND is a fully transparent fixed income ETF designed to provide current income and total return. Although it uses the Bloomberg US Aggregate Index (formerly known as the Barclay U.S. Aggregate Index) as its benchmark, it has wide latitude to invest in a wide range of fixed income securities of any credit quality. In fact, up to half of the portfolio can be invested in below-investment-grade securities, its prospectus says.
A fact sheet from DoubleLine notes that top-down sector allocations in the fund are determined by the firm’s Fixed Income Asset Allocation Committee, while bottom-up security selections are made by the fund’s portfolio managers using fundamental research and relative value analysis.
Sherman and Gundlach also co-manage DBND.
“You can think of it as a Barclays Agg surrogate; however, it will be extremely active—it will look nothing like the Barclays Agg,” Sherman said, noting that the fund will invest across the entire global fixed income market.
He adds that asset allocation and building multisector bond portfolios are among DoubleLine’s core competencies.
However, DoubleLine is no newcomer to the ETF space. For years, it has been subadvising actively managed ETFs worth more than $2.7 billion in total for State Street Global Advisors and AdvisorShares. The firm says that its relationships with those other issuers will remain unaffected by its entry into the market.
Contact Heather Bell at [email protected]