Bond king Jeff Gundlach’s foray into the world of exchange traded funds is now official with Tuesday’s debut of the SPDR DoubleLine Total Return Tactical ETF (NYSEArca: TOTL), the first ETF to offer investors access to the investment process at Gundlach’s DoubleLine Capital.
Gundlach, DoubleLine’s CEO and chief investment officer, will serve as the SPDR DoubleLine Total Return Tactical ETF’s portfolio manager along with Philip Barach, DoubleLine president, and Jeffrey Sherman, portfolio manager and participant on the firm’s Fixed Income Asset Allocation Committee.
“Investors are concerned about rising interest rates, they’re concerned about the bond market in general,” said said State Street Global Advisors Head of Research David Mazza in an interview with ETF Trends. “In investment-grade fixed income, active managers, particularly those with an expertise actually have the ability to consistently outperform. Now you can get access to it with the cost-efficiency and ease-of-use of an ETF.” [State Street, Gundlach to Partner on new ETF]
The actively managed ETF, which will be managed with a top-down macroeconomic process, offers investors exposure to multiple fixed income asset classes using a bottom-up security selection methodology. Half of TOTL’s initial portfolio is comprised of U.S. government debt as part of the new ETF’s duration management effort while the rest of the portfolio includes investment-grade and high-yield corporate as well as dollar-denominated emerging markets debt, among other bonds, as part of TOTL’s credit risk management process.
TOTL combines traditional fixed income investment sectors of the Barclays US Aggregate Bond Index and fixed income asset classes outside the index with the goal of maximizing total return over a full market cycle through active sector allocation and security selection. DoubleLine will strive to maintain TOTL’s portfolio investments with a shorter duration than that of the Barclays US Aggregate Bond Index. Duration is a measure of the sensitivity of the price of a fixed income investment to a change in interest rates expressed as a number of years, according to a statement issued by State Street Global Advisors.
“DoubleLine is pleased to partner with SSGA, the pioneer of exchange traded funds,” said Gundlach in the statement. “DoubleLine was founded on the idea of striving to deliver better risk-adjusted returns across our different investment strategies. In TOTL, we will strive to maintain the fund’s portfolio investments with a shorter duration than the Barclays US Aggregate Bond Index while seeking to generate a healthy yield. That combination is key to meeting the fund’s total return objective within a discipline of strong risk management.”
Los Angeles-based Double Line currently offers mutual funds including bond funds focusing on low duration bonds. The firm also offers multi-asset strategies as well as a mutual fund focusing on small-cap stocks. The firm reportedly pulled in $3 billion in new assets last month and had $64 billion in assets under management at the end of 2014. [Inside Gundlach’s New ETF]
TOTL, which charges 0.55% per year, debuted with $112.5 million in assets under management, according to SSgA data. That makes TOTL one of the most successful new ETFs to come to market this year.