Newcomer Debuts Long/Short Yield ETF

Today saw an ETF rollout from another asset manager new to the space, boutique advisory Leatherback Asset Management. The Leatherback Long/Short Alternative Yield ETF (LBAY) is an actively managed ETF that takes long positions in securities offering “sustainable yield” while shorting securities expected to see their prices decline.

LBAY comes with an expense ratio of 1.09% and lists on the NYSE Arca.

“LBAY provides that income for allocators for their investors in an ETF wrapper that provides different correlation strings to both equities and fixed income, lower volatility [and potential downside protection]. It genuinely is an alternative source of yield,” says Leatherback founder Michael Winter.

He believes the fund is a good way to address the disruption of the traditional 60/40 model, largely caused by overvaluations of both stocks and bonds and the fact that interest rates are at what he terms “generational lows.”

Methodology

The fund can take long positions in a wide variety of income-producing securities, including common stocks, preferred stocks, other ETFs, closed-end funds, business development companies, master limited partnerships, real estate investment trusts, and yieldcos. It will short individual companies to take advantage of “idiosyncratic opportunities” based on criteria such as poor financial statements, overvaluation or poor governance, among other data, according to the prospectus.

The fund can also implement options strategies, the document says.

Winter notes that alternative strategies tend to come with illiquidity risk, but that LBAY will circumvent that due to the fact that the securities in both the long and short portions of the portfolio are very liquid.  

“Together, with the income stream on top of that, LBAY should be very interesting to and resonate with investors,” he added.

Contact Heather Bell at [email protected]