Coscioni: Why I Own Gundlach's TOTL

Advisor embraces relatively new fund due to bond guru's ability to manage head winds.

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Reviewed by: Lara Crigger
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Edited by: Lara Crigger

[This article originally appeared in our July issue of ETF Report.]

Bill Coscioni, Chief Investment Officer

Jim Clark

Firm: WealthCare Financial Planners
Location: Aiken, SC
Founded: 2009
AUM: Less than $50 Million
% OF AUM IN ETFs: 99%


What drew you to the SPDR DoubleLine Total Return Tactical ETF (TOTL)?

TOTL fund manager Jeff Gundlach. Jeff has been extraordinary in the fixed-income mutual fund investment business. He's an icon, and I have high regard for him.

TOTL only launched in February 2015. Were you concerned about the lack of track record, or was Gundlach's reputation as an active manager enough to quell any worries?

It is a relatively new fund. A track record really hasn't been established yet. But the combination of DoubleLine and Gundlach has the potential to be a winning one, especially in the environment we're in right now. We have this continual head wind of promised rate increases that the Fed keeps throwing in our faces, and the lack of action is always troubling in a fixed-income environment. So we wanted to be with a group we knew could manage that head wind.

What else do you like about the fund?

In the fixed-income area, expense ratios are always a little higher. But TOTL's are right in line.

Because there isn't any track record, we may have this conversation again a year from now, and I'll have a different opinion on the fund. I acknowledge we're taking a bit of a risk. But I think it's a well-strategized risk.

What downsides does TOTL have?

A changing rate environment could have some impact on it. Last year, fixed income did very well, though I don't expect that this year. But I think TOTL's durations are very manageable. I don't foresee a lot of volatility. Should we see interest rate increases of 1%—which is huge, considering where they are—that would essentially mean doubling. So you have to manage that. And I don't see huge risk in being in TOTL.

What would be the trigger for you to get out of TOTL?

It wouldn't be a horizon change. It would be if returns weren't comparable or better than sister ETFs in the marketplace. If I looked at second-quarter results and saw that another fund is performing significantly better, I may take a closer look and research why TOTL lags.

If it's because the fund is very conservative, then maybe these others have drifted off the market and slipped some junk in. If TOTL has made some tactical errors, then of course you'd want to switch. But it's easy to be an 11th-inning umpire!


Do you have any words of wisdom for investors looking at the active bond ETF space?

I would encourage them to broaden their outlook. Go from widescreen to panorama. I think they should include in their analysis preferred stocks and convertibles, such as the SPDR Barclays Convertible Securities ETF (CWB | C). And, the PIMCO Total Return ETF (BOND | C) is another good global fixed-income active ETF. It's relatively new too, but it has a longer track record than TOTL.

So I'd say, go beyond the typical bond funds. Run down different avenues, embrace other securities besides bonds—not to bonds' exclusion, of course, but blend bonds with convertibles and preferreds, and I think you'll find opportunity to have a less rocky ride.

How do you feel about other fixed-income ETFs besides TOTL?

There's not a lot of track record for some of the ETFs available, but preferred stocks have done very well. I consider those a good fixed-income alternative. Personally, I like the SPDR Wells Fargo Preferred Stock ETF (PSK | B). It has a good track record and is well-managed, with a reasonable expense ratio.




Lara Crigger is a former staff writer for etf.com and ETF Report.