New DoubleLine ETF Capitalizes on Bond Market Inefficiencies

The recently launched bond exchange traded that tracks bond guru Jeff Gundlach’s investment strategy could allow investors to capture potential opportunities in a changing fixed-income landscape.

On the recent webcast, Fine-Tuning Your Fixed Income Strategy, Jeffrey J. Sherman, portfolio manager at DoubleLine Capital, believes that an actively managed fixed-income fund, such as the newly launched SPDR DoubleLine Total Return Tactical ETF (NYSEArca: TOTL), provides a methodical combination of traditional rate sensitive sectors with non-traditional credit sensitive areas to generate returns and diminish risk.

Sherman argues that the active approach allows managers to weave in an out of the fixed-income market to optimize returns. An active team can shift allocations, reduce or increase duration and adjust risk exposure in response to changes in the fixed-income outlook. [Inside the New Gundlach, State Street Bond ETF]

“Mispricings of bonds do occur and can potentially generate alpha,” Sherman said. “Active risk-portfolio management is crucial, and DoubleLine believes that especially in times of heightened uncertainty.”

Specifically, Sherman pointed out that a core bond indexing strategy presents challenges in a low-yield environment since the U.S. Treasuries heavy core-bond strategy would have seen yields diminish considerably and duration lengthen. Consequently, investors are now exposed to the lowest yield-to-duration ratio since the inception of the Barclays U.S. Aggregate Index.