New ETFs On The Block: SPDR Doubleline Total Return Tactical ETF (TOTL)

106496625Jeffry Gundlach, the famed bond-fund manager of DoubleLine Capital that oversees $64 billion in assets, recently got involved with State Street Global Advisors (SSgA) to launch its first exchange-traded fund in the country.

The newly launched SPDR DoubleLine Total Return Tactical ETF (TOTL) is an actively-managed fund that will face the challenges in a slowly evolving fixed-income landscape and will directly compete with PIMCO Total Return Active Exchange Traded Fund, run by “Bond King” Bill Gross of Pacific Investments previously.

To be sure, Gundlach is possibly the most respected bond fund manager in the market today. Prior to founding the Los Angeles-based DoubleLine Capital, Gundlach managed the $12 billion TCW Total Return Bond Fund until 2009 before a messy split-up and has since become one of the most widely followed bond strategists in the business.

With Bill Gross’ exit from PIMCO in September, DoubleLine continued to benefit greatly and recorded its 13th straight month of inflows in February following a record $3 billion net inflow in January.

The new fund seeks to allocate assets among eight fixed-income sectors using a top-down macroeconomic approach while individual securities are selected through a more granular bottom-up approach. The fund is marketed as a “core” bond fund that provides a methodical combination of conventional rate-sensitive sectors with non-traditional credit sensitive areas, and can seek exposure across the global fixed-income markets.  The ETF seeks to exploit bond mis-pricings to generate alpha while diminishing risks simultaneously through active portfolio management.

In a typical low-yield environment, core-bond strategies witness considerable yield-drop amid lengthening duration. In the US, investors are now staring at the lowest yield-to-duration ratio since the introduction of the benchmark Barclays US Aggregate Bond Index.

Hence, the intermediate-term TOTL has a broader mandate and can include Treasuries, mortgage-backed securities (MBS), domestic and foreign investment-grade corporate bonds, floating rate notes and foreign government bonds that includes emerging markets. Region-wise North America contributes the maximum (88.52%), followed by South America (5.22 percent) and Central America (3.16 percent).

More than two-third of the fund’s portfolio (71.55 percent) have a credit-rating of AAA while nearly half of the securities (45.50 percent) mature between 20 and 30 years. TOTL holds 252 securities with an average coupon of 4.20 percent and a modified adjusted duration of 3.92 years.

The fund has a net annual expense ratio of 0.55 percent.

Disclosure: No holdings

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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