These are trying times for fixed income investors. There is the obvious concern of rising interest rates coupled with increased criticism of disadvantages faced by advisors and investors when dealing with the aggregate bond indexes used by popular fixed income exchange traded funds.
The WBI Tactical Income Shares (NYSEArca: WBII) is becoming a standout among actively managed ETFs and can help investors deal with the aforementioned bond issues in stride.
WBII has benefited from being at the right place at the right time, coming to market amid a surge in volatility that sent investors flocking to low volatility strategies. WBII provides “provides low volatility, low correlation and an optimal blend of bear market capital preservation and bull market return,” according to WBI Shares.
“WBI’s proprietary bond model strives to reduce interest rate risk on core bond holdings in an effort to protect invested capital. The goal is to actively shorten duration to minimize loss as interest rates rise, or to lengthen duration to increase yield and potential for capital gain as interest rates decline,” according to the issuer. [A Simple Short-Term Bond ETF]
WBII, which debuted in August as part of WBI’s 10-ETF suite of actively managed funds, has been a key driver of the New Jersey-based firm’s growth. All 10 WBI ETFs are now home to over $100 million in assets under management, with WBI housing over $303 million in assets. Only PIMCO, First Trust, WisdomTree, StateStreet and iShares have more actively managed ETF assets under management than WBI. [A Rising Active ETF Power]
Those are nice statistics, but they are also superficial. What advisors and investors should care about is WBII’s ability to deliver, something the ETF has done with aplomb. Through May 29, WBII “produced a total Year-to-Date net return of 2.55%, outpacing the U.S. bond market’s return of 1.00%, based on the total return of the Barclays U.S. Aggregate Index,” according to issuer data.
The ETF’s top 10 holdings include stakes in a few Guggenheim BulletShares ETFs, an iShares bond fund and U.S. Treasurys.
“The Fund is active in an effort to reduce risk to protect capital and tactical in an attempt to find the best global investment opportunities. WBII typically invests in income-producing debt and equity securities of foreign and domestic companies. The Fund was negatively correlated with the index over the period: with Beta of -0.08 and correlation of -0.04, WBII provided a true diversification benefit in addition to its excess return. The Fund generated positive returns 56% of all trading days during the five months ended 5/29/15, with 60 positive trading days and only 47 negative days. This results in a healthy 1.3 to 1 win/loss ratio,” according to WBI.
Chart Courtesy: WBI Investments