The most popular actively managed ETFs this year tell a story that’s not as much about investors chasing outsized performance as it is about ETFs being used for specific goals.
In 2017, a lot of assets have flocked into active ETFs that offer safety and income.
PIMCO Enhanced Short Maturity Active ETF (MINT)
MINT has seen $1.43 billion in net creations year-to-date. That’s about a quarter of all creations seen in active ETFs.
This fund is the most popular active ETF this year, and it’s also the market’s largest active ETF, with $7 billion in assets. Although the fund is not the cheapest in its segment, its liquidity is unparalleled among competing active ETFs. That’s important for a fund that offers investors quick access to cash as well as attractive yields relative to money market mutual funds.
MINT trades some $58 million on average a day at penny spreads. It is paying a 30-day yield and a distribution yield of 1.46%.
This ETF has an expense ratio of 0.36%. That’s about 40% more than the price tag for the competing iShares Short Maturity Bond ETF (NEAR), which is also active. NEAR is a smaller fund, with $2.5 billion in assets, and is less liquid.
Total returns aren’t huge, but they continuously trend higher:
SPDR Blackstone / GSO Senior Loan ETF (SRLN)
SRLN has seen $693 million in new assets year-to-date. The fund offers access to senior loans, which are floating-rate corporate debt that reset in three months or less. As interest rates rise, investors have increasingly been turning to the appeal of floating-rate securities. The fund has $1.8 billion in assets, and has a 0.70% expense ratio.
In the case of SRLN specifically, the fund is outperforming its two competing passive counterparts, the Highland iBoxx Senior Loan ETF (SNLN) and the PowerShares Senior Loan Portfolio (BKLN), and by a good margin.
That outperformance is partially due to the fund’s inclusion of foreign corporate issues, as well as its active manger’s ability to try to buy and sell credits before they are added or dropped from benchmarks. The chart below shows the three funds’ year-to-date performance:
First Trust Preferred Securities & Income ETF (FPE)
FPE has seen $613.5 million in new inflows this year and sets out to generate income by investing globally in preferred equities and income-producing debt from companies of all market capitalizations.
The fund’s focus is on preferred stocks—equities that behave a lot like fixed income—and to a good result: 30-day yield in this portfolio is 5.65%.
Between banks, insurance and capital markets, more than 60% of the portfolio is tied to financials. And most of the securities in the mix are floating rate—10%—and fixed-to-floating at 66%. Only 22% are fixed-rate securities in a portfolio that otherwise carries sizable interest rate risk due to its average effective duration exceeding four years.
In all, FPE is up 7.7% so far this year, as the chart below shows. The fund has $2.2 billion in total assets, and has a 0.85% expense ratio.
First Trust Senior Loan Fund (FTSL)
FTSL has seen $456 million in net creations year-to-date, and is another fund that’s growing in popularity with investors thanks to its focus on floating-rate securities—at a time of rising rates—and on high-income-generating bonds and equities.
The fund is noticeably more expensive than competing SRLN, with its 0.86% expense ratio, but it’s still gaining a following, particularly with the trader crowd, according to our research. FTSL trades more than $6 million on average every day, and it has nearly $1.3 billion in total assets today.
Unlike SRLN, FTSL’s performance hasn’t been as strong this year, but like SRLN, the fund has been able to outperform competing passive funds.
Charts courtesy of StockCharts.com
Contact Cinthia Murphy at [email protected]