AdvisorShares, the Bethesda, MD-based exchange-traded fund sponsor known for its range of actively managed products, entered the ultra-low duration space of the fixed-income market through the launch of Sage Core Reserves ETF (HOLD) recently. Sub-advised by Texas-based independent investment management firm Sage Advisory, the fund seeks to preserve capital while maximizing income.
2013 turned out to be a bad year for fixed-income investors as the QE taper and rising yields hit bond prices hard, forcing many to abandon the asset class altogether.
Nevertheless, investors who are looking for income funds, but are worried about interest-rate risks, may consider HOLD since it gives a new twist to play this segment.
Though the fund sounds similar to other fixed-income products out there, it does put a spin on the broader market. HOLD doesn’t track any index, and the fund managers invest in a wide range of securities, including bonds, forwards and swaps issued by US and foreign issuers, and US dollar-denominated investment-grade debt and mortgage/asset-backed securities with credit ratings of Baa- or higher by Moody’s. On a day-to-day basis, the fund may hold money-market instruments, cash, other cash equivalents and exchange-traded products that invest in such highly liquid instruments to collateralize its derivative positions.
Sage Advisory will use a top-down approach to focus on active management of duration risk, yield curve positioning and market segment allocations.
The average duration of the fund will vary depending upon the forecast for interest rates, but will not exceed one year under normal conditions. Duration is a measure of a bond’s price sensitivity to interest rate changes. HOLD’s portfolio duration of one year or less will ensure the fund remains less sensitive to interest rate changes while moderating price fluctuations. The dollar-weighted average portfolio maturity is normally not expected to exceed three years.
The fund has an annual expense ratio of 0.35 percent, which is pretty inexpensive for an actively managed fund.
Disclosure: No holdings