Newfleet Asset Management, the first affiliated manager to utilize the white-label exchange traded fund services of Virtus Investment Partners, launched a flexible, unconstrained bond ETF strategy that can adapt to changing market conditions.
The Newfleet Multi-Sector Unconstrained Bond ETF (NYSEArca: NFLT), which began trading on August 10, tries to provide high current income and capital appreciation. NFLT has a 0.8% expense ratio.
The bond ETF will be managed by Newfleet Asset Management’s David Albrycht, president and chief investment officer; Jonathan Stanley, managing director, portfolio manager and sector manager for high yield credit; and Christopher Kelleher, senior managing director, senior portfolio manager and the head of institutional asset management.
The management team will target the right areas of the global bond market at the opportune times, implementing active sector rotation and disciplined risk management to achieve long-term excess returns.
The unconstrained investment style does not require a manager to adhere to a specific benchmark. Instead, unconstrained strategies allow a manager to focus on returns across many asset classes and sectors and the styles typically have a more long-term horizon. Moreover, a portfolio manager may use derivatives and other alternative asset classes to hedge market exposure.
“While NFLT embraces the virtues of diversification, the lack of formal sector, industry, or country limitations means that the team can express its highest conviction ideas,” according to Newfleet. “Unlike many unconstrained funds, however, NFLT does not invest in equities, which can be highly volatile and out-of-sync with bond investors’ expectations. Because the Fund is benchmark agnostic, Newfleet is not compelled to take risks embedded in the Index, such as unwanted exposure to rising interest rates or overvalued credits.”
The ETF will analyze value assessment of sectors to determine under- and overweights, along with interest rate outlook and sector allocation targets. Next, the team will look at fundamentals and assess credit risks, company management, issue structure and technical conditions. Lastly, the managers will select high-conviction picks across 14 sectors, without restrictions on speculative-grade or non-U.S. securities.
As of August 12, NFLT includes a significant cash and cash alternative holdings, such as 96.5% tilt toward Treasury bills 9/3/2015 and 2.0% cash.
The Newfleet fund was launched with the help of Virtus Investment Partners, which acquired a majority stake in the turn-key ETF services provider, ETF Issuer Solutions. [Virtus Acquires Majority Stake in ETF Issuer Solutions]
NFLT will be competing against the recently launched WisdomTree Western Asset Unconstrained Bond Fund (NasdaqGS: UBND). [A New Bond ETF With no Constraints]
For more information on new fund products, visit our new ETFs category.
Max Chen contributed to this article.