ETF Filing: Multistrategy Bond Fund Planned

A recent filing from Columbia Threadneedle outlines its plans for a multistrategy fixed-income ETF. The Columbia Diversified Fixed Income Allocation ETF will track an index that covers multiple sectors.

The fund will track the Beta Advantage Multi-Sector Bond Index, which covers six sectors of the debt market, including U.S. Treasury securities, global ex-U.S. Treasury securities, U.S. agency mortgage-backed securities, U.S. corporate investment-grade bonds, U.S. corporate high-yield bonds and emerging market sovereign and quasi-sovereign debt.

Each sector is assigned a fixed weighting and takes into account yield, quality and liquidity when selecting components.

US Treasury Securities

The U.S. Treasury securities included in the index must have a remaining maturity of more than seven years, be rated investment grade and denominated in U.S dollars and have at least $250 million of outstanding face value, among other requirements.

Non-US Treasury Securities

Meanwhile, the non-U.S. treasury securities portion of the portfolio will include only securities with seven to 12 years of remaining maturity and a yield of more than zero. The holdings must be drawn from 11 developed markets, with the methodology selecting the largest single debt security from each one and equal-weighting them, the prospectus said.

Agency Mortgage-Backed Securities

The agency mortgage-backed securities portion of the portfolio will track securities issued by government-sponsored enterprises that also have a 30-year fixed rate program, have an issuance date of 1,000 days or fewer and are denominated in U.S. dollars, according to the document.

Corporate Investment-Grade Debt Securities

The corporate investment-grade debt holdings must have a remaining maturity from five to 15 years, an investment-grade credit rating and an issuance date of not less than 1,000 days, not to mention at least $250 million in par amount outstanding. From that pool, the methodology includes the two largest issues from each issuer.

High-Yield Corporate Debt Securities

However, the high-yield corporate debt securities selected for the index must have $800 million in outstanding face amount and a remaining maturity of less than 14 years, with issuance occurring within the past five years. The methodology again selects the two largest issues from each issuer, but caps each issuer at 2% based on market value, the prospectus said.

Emerging Markets Debt

Finally, the emerging markets debt portion of the portfolio can include investment-grade and high-yield debt that is not from corporate issuers; it must have a remaining maturity of between five to 15 years, and a minimum amount outstanding of at least $2 billion. From that pool, the methodology selects the two largest issues from each issuer, capping weights of individual countries at 10%, according to the document.

The overall index is rebalanced on a monthly basis.

The filing did not include an expense ratio, ticker or listing exchange.

Contact Heather Bell at [email protected].