Most Popular New Fixed Income ETFs

July 25, 2019

First Trust Low Duration Strategic Focus ETF (LDSF)

AWTM is the only new fixed income ETF so far this year to pick up more than $100 million in assets. The next one on the list, the First Trust Low Duration Strategic Focus ETF (LDSF), has managed to gather $30.6 million since January.

The fund, which has an expense ratio of 0.86%, is another actively managed low-duration product. Unlike the aforementioned AWTM, LDSF doesn’t target the ultra-low-duration space; rather, it aims for an effective portfolio duration of three years or less. That gives the fund a slightly higher 30-day SEC yield of 3.1%

LDSF is a fund of funds, so it holds other ETFs to meet its investment objectives.  Those ETFs target a combination of investment-grade, subinvestment-grade and international fixed income securities.

The top holdings currently include the First Trust Low Duration Opportunities ETF (LMBS) and the iShares MBS ETF (MBB).

Principal Ultra-Short Active Income ETF (USI)
At the No. 3 position on our list is another actively managed ETF, the Principal Ultra-Short Active Income ETF (USI), with inflows of $12.5 million and an expense ratio of 0.18%. USI targets the ultra-short duration space, just like AWTM.

Specifically, USI aims for an average effective maturity of three years or less, and an average portfolio duration of one year or less. The fund sometimes stretches for yield outside of the U.S., but predominantly holds U.S. investment-grade securities, especially corporates.

The current 30-day SEC yield stands at 2.6%.

First Trust Long Duration Opportunities ETF (LGOV)
The First Trust Long Duration Opportunities ETF (LGOV) is the first of the ETFs on this list that seeks exposure to longer-duration fixed income securities. Launched in January, LGOV has picked up $10 million in assets so far and has a 0.65% expense ratio.

It’s an actively managed fund that primarily targets U.S. government-backed, investment-grade securities—Treasuries, mortgage-related securities and the like. But it can also hold subinvestment-grade securities with up to 20% of its portfolio, and even short positions with up to 30% of its portfolio.

As advertised, the fund has a relatively long duration of around 12.4 years, but its 30-day SEC yield of 1% is low compared with similar funds.

SPDR SSGA Fixed Income Sector Rotation ETF (FISR)
The SPDR SSGA Fixed Income Sector Rotation ETF (FISR) rounds out the list of new fixed income ETF launches. It’s taken in $8.5 million and has a price tag of 0.50%.

Like the other funds on this list, FISR is actively managed. The fund attempts to provide excess return by “tactically allocating among income and yield-generating ETFs based on a proprietary process that combines quantitative and qualitative analysis.”

A fund-of-funds, FISR invests in ETFs that focus on U.S. government or agency fixed income securities, TIPS, corporate bonds, mortgage-backed securities, high yield bonds, senior loans and international bonds.

FISR’s broad reach results in a solid 30-day SEC yield of 3.1%. Top holdings include the SPDR Bloomberg Barclays Mortgage Backed Bond ETF (MBG), the SPDR Portfolio Long Term Corporate Bond ETF (SPLB) and the SPDR Bloomberg Barclays Intermediate Term Treasury ETF (ITE).

​Email Sumit Roy at [email protected] or follow him on Twitter @sumitroy2

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