Best New U.S. Fixed-Income ETF
Awarded to the most important fixed-income ETF launched in 2015.
Note: Importance is measured by the overall contribution to positive investor outcomes. The award may recognize an ETF that opens new areas of the market, lowers costs, drives risk-adjusted performance or provides innovative exposures not previously available to most investors. Only ETFs with inception dates after Jan. 1, 2015, are eligible. The ETF must be classified by FactSet as a U.S. fixed-income ETF to qualify.
· FlexShares Credit-Scored U.S. Long Corporate Bond (LKOR)
The financial crisis of 2008 proved that the credit ratings offered by S&P, Moody’s and Fitch are significantly flawed. LKOR solves that problem, offering broad-based exposure to the U.S. corporate bond market while relying on Northern Trust’s proprietary credit ratings system to enhance the best bonds. With an expense ratio of just 0.22%, what’s not to like?
· iShares U.S. Fixed Income Balanced Risk (INC)
One of the first attempts to smart beta-ize fixed income, INC takes broad-based bond exposure and tweaks it to ensure the resulting portfolio has equal exposure to credit spreads and duration risk. As FactSet explains: “In theory, by having equal exposure to both factors, INC should perform fairly well in most interest rate and credit spread scenarios except when both rates rise and spreads widen.”
· iShares Short Maturity Municipal Bond (MEAR)
MEAR offers a unique solution for investors looking for a cash management strategy. The fund holds a portfolio of muni bonds with maturities of three years or less, packaging it with a low expense ratio of 0.25%. Where else can you get tax-advantaged yield over 1% with limited duration risk?
· Vanguard Tax-Exempt Bond (VTEB)
Muni bond ETFs had been exempt—pun intended—from the vicious fee wars taking place elsewhere in the ETF market. But VTEB changes that, offering broad-based exposure to the muni space with a fee of just 0.12%. With yields low, that low fee really matters.
· WisdomTree Barclays U.S. Aggregate Bond Enhanced Yield Fund (AGGY)
Finding yield in today’s market is challenging, and AGGY offers a unique solution. The fund offers broad-based exposure to investment-grade bonds but tilts the portfolio by weighting components by yield-to-worst. The result is a sensible approach to creating an enhanced-yield portfolio.
Best New International/Global Fixed-Income ETF
Awarded to the most important international or global fixed-income ETF launched in 2015.
Note: Importance is measured by the overall contribution to positive investor outcomes. The award may recognize an ETF that opens new areas of the market, lowers costs, drives risk-adjusted performance or provides innovative exposures not previously available to most investors. Only ETFs with inception dates after Jan. 1, 2015, are eligible. The ETF must be classified by FactSet as a fixed-income ETF, but not a U.S.-focused fixed-income ETF, to qualify.
· Deutsche X-trackers Emerging Markets Bond - Interest Rate Hedged (EMIH)
EMIH is the first interest-rate-hedged ETF that attempts to juice overall yields by focusing on the emerging market space. The fund targets U.S.-dollar-denominated bonds in the emerging market space and then shorts Treasury futures to minimize duration risk.
· iShares Core International Aggregate Bond (IAGG)
IAGG holds a diversified portfolio of global, non-U.S.-dollar-denominated bonds, and then hedges out the exposure to the U.S. dollar. The fund is quite similar to Vanguard’s hugely popular BNDX, helping to create competition and other opportunities in the fast-growing international bond market.
· SPDR DoubleLine Total Return Tactical (TOTL)
The fastest-growing new ETF to launch in 2015, TOTL delivers bond guru Jeffrey Gundlach’s active management acumen in an easy-to-buy ETF wrapper. While it’s been a difficult market for bonds in general, TOTL has managed to outperform the market significantly since launch.
· Virtus Newfleet Multi-Sector Unconstrained Bond (NFLT)
This actively managed bond fund can go just about anywhere, investing in domestic, international and emerging market bonds, USD- or non-USD-denominated, investment grade or high yield and in any sector. If you believe in active management in the bond space, this is a good test case.
· WisdomTree Western Asset Unconstrained Bond (UBND)
Western Asset Management is one of the marquee names in the actively managed bond space, and this fund unleashes its expertise on the ETF market. The go-anywhere fund can hold almost anything, including short positions, and gives the manager latitude to prove its chops.