Gundlach's DoubleLine Launches 2 Real Estate ETFs

Gundlach's DoubleLine Launches 2 Real Estate ETFs

The launches come during a troubling time for the real estate industry.

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Reviewed by: Shubham Saharan & Heather Bell
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Edited by: Shubham Saharan & Heather Bell

Jeffrey Gundlach’s DoubleLine Capital is venturing into a tumultuous real estate market with its latest exchange traded fund launches.  

The two new active funds, the DoubleLine Commercial Real Estate ETF (DCMB) and the DoubleLine Mortgage ETF (DMBS) launched Tuesday, according to a company statement. DCMB, which invests in investment-grade mortgage-backed securities charges a 0.39% expense ratio. Meanwhile, DMBS charges 0.49% and holds a portfolio of residential mortgage-backed securities. 

Gundlach will serve as the portfolio manager for DMBS, the statement reads.  

DoubleLine Deputy Chief Investment Officer Jeffrey Sherman emphasized his firm’s expertise in the areas of commercial real estate and mortgages.  

“Our team has a specific skill set in the commercial real estate [industry in] that they span both public and private markets,” Sherman said in an interview with etf.com, noting that DCMB’s management team has the ability to build a commercial real estate portfolio that targets low interest rate risk, short duration and high credit quality.  

DCMB will focus on investments rated single A and above, he added.  

“What we're trying to do is dampen the volatility that exists in that market. And today, we're very excited about that product, because it is one of the markets that actually is priced to reflect the weakness across the economy and the weakness within the sector. We think, today, that is an extremely attractive opportunity,” Sherman said. 

Still, the fund's launch comes at a troubling time for the commercial real estate businesses.  

In a recent interview with CNBC, billionaire Leon Cooperman noted that commercial real estate may be the next shoe to drop following a smattering of bank failures last month, adding that banks are easing up on lending and commercial real estate contracts to shore up on liquidity.  

"I think it will spread into commercial real estate as banks become more reluctant to lend," Cooperman said in the Monday interview. "That seems to be the whipping boy right now, [but] we'll survive this." 

Commercial real estate defaults recently jumped to a 14-year high, as the work- and shop-from-home trend alongside decades-high interest rates tore into the industry, Investopedia reported at the end of March.  

DMBS focuses on residential mortgage-backed securities and other residential mortgage-related securities, according to its prospectus.  

“As an allocator, looking to get residential mortgage exposure, from our standpoint, we want to look at the full opportunity set. That full opportunity set encompasses both agencies as well as nonagency mortgages,” said Sherman. “We believe that the skill set of the team, and again, our experience of navigating both sides of the market, brings value.”  

He notes that the active management aspect of the fund allows its managers to exercise their expertise to target higher quality earnings and tactically allocate between agency and nonagency mortgages based on relative valuations. 

DoubleLine currently manages two other U.S.-listed ETFs, with $377 million in assets: the DoubleLine CAPE U.S. Equities ETF (CAPE) and the DoubleLine Opportunistic Bond ETF (DBND), according to etf.com data.  

 

Contact Shubham Saharanat[email protected]  

Contact Heather Bell at [email protected]