AdvisorShares, the Bethesda, Maryland-based sponsor of actively managed exchange-traded funds, has teamed up with San Francisco-based Newfleet Asset management, to launch a global broad-based income focused fund, the AdvisorShares Newfleet Multi-Sector Income ETF (MINC). If you are looking for exposure to all major bond sectors through a value-oriented approach, you may find MINC attractive.
MINC aims to provide current income consistent with preservation of capital, while limiting variations in net asset value due to changes in interest rates. To achieve its investment objective, the sub-advisor employs active sector rotation and disciplined risk-management in the construction of the fund’s portfolio.
Since MINC is an actively managed ETF, it does not seek to replicate the performance of a specified passive index of securities; rather the fund uses a top-down, relative value approach that assesses factors such as yield and spread, supply and demand, investment environment and sector fundamentals.
Subsequently, particular investments are selected using a bottom-up, fundamental research-driven analysis that includes assessment of credit-risk, issuer capital structure, company management, technical market conditions, and valuations. The portfolio is regularly reviewed to minimize risk exposures such as portfolio duration and sector concentration. Investment in individual securities is capped at 5 percent of the fund’s total assets, and the fund strategically seeks to overweight undervalued bond sectors in an effort to add value to the portfolio.
The fund principally invests in investment-grade securities and seeks to provide diversification by allocating assets among various sectors of the fixed-income markets including corporate investment-grade, corporate high-yield, bank loans, taxable municipal bonds, tax-exempt municipal bonds, commercial mortgage-backed securities (CMBS), agency and non-agency residential mortgage-backed securities (RMBS), non-US dollar securities, emerging market high-yield securities, Yankee investment-grade bonds and securities issued or guaranteed by the US government and its agencies.
The average duration of the securities may vary between one and three years and the fund may invest up to 20 percent of its total assets in below investment-grade securities at the time of purchase.
A relatively low duration makes the fund less sensitive to interest rate fluctuations. If a certain holding falls below investment grade due to downgrading, MINC may still continue to hold the securities, and they will not count toward the fund’s 20 percent investment limit. To enhance risk-control measures further, exposure to non-US securities are capped at 30 percent while investment in a particular industry is limited to 25 percent of total assets.
The fund has a net annual expense ratio of 0.75 percent; it is also brand new so no performance or price history is available, which means I will have to revisit it at some time in the future to make a better assessment as to its suitability.
Disclosure: No holdings