AdvisorShares, the Bethesda, Md.-based fund provider known for its actively managed strategies, is slated to launch a global broad-based income-seeking bond ETF on Wednesday that will join the likes of a $2.78 billion Pimco actively managed fund as well as passive strategies.
The AdvisorShares Newfleet Multi-Sector Income ETF (MINC) will invest primarily in investment-grade debt, but will own everything from government to corporate to emerging market to high-yield bonds in a portfolio that has an average duration of one to three years. The fund comes with a total annual cost of 0.75 percent, including 0.65 percent in management fees.
MINC is more than twice as expensive as the Pimco Enhanced Short Maturity Strategy ETF (MINT), a fund that has gathered $2.78 billion in just over three years and costs 0.35 percent, but the fund is also actively managed, even if it's designed to carry a higher yield and a longer duration than Pimco's MINT. Others in the space would include funds like Vanguard's Short Term Bond Fund (BSV), but that's a index strategy.
Through Newfleet Asset Management’s credit research, MINC sets out to capitalize on some of the most undervalued segments of the bond market, the company said in its latest prospectus. Newfleet is a collaboration between a San Francisco-based fixed-income asset manager and one based in Hartford, Conn.
The strategy seeks to generate income while preserving capital and limiting fluctuations in net asset value linked to changes in interest rates. Demand for income-producing funds has been strong, especially at a time when interest rates are at all-time lows. Funds that are global in scope and that diversify the fixed-income risk across various segments of the bond market remain relatively hard to find in a single ETF wrapper.
"MINC has a more opportunistic approach [than MINT] by overweighting and underweighting securities across 14 different bond sectors, so it's diversified and tactical to manage both risk and returns," an AdvisorShares' executive told IndexUniverse. "Its opportunistic approach makes it a rather unique offering where there isn't necessarily a fair active ETF comparison."
MINC’s portfolio will include investment-grade and high-yield corporate bonds, commercial mortgage-backed securities, residential mortgage-backed securities, U.S. government and foreign government debt, and emerging market high-yield bonds, to name a few. As much as 20 percent of the mix may be allocated to below-investment-grade securities.
MINC's anticipated yield to maturity is roughly 2.7 percent, with current yield pegged at 3.2 percent and duration at 2.6 years.
By comparison, Pimco’s MINT allocates roughly half of the portfolio to investment-grade credits. MINT also has an effective maturity of one year, as some 60 percent of the fund is allocated to zero- to one-year securities.
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