Guggenheim Investments launched its own actively managed bond exchange traded fund, providing investors with another means to bet on a money manager’s ability to effectively navigate the fixed-income market in a rising rate environment.
The Guggenheim Total Return Bond ETF (NYSEArca: GTO) utilizes a multi-sector strategy and primarily holds investment-grade fixed-income securities across multiple sectors, according to a press release. GTO comes with a 0.50% expense ratio.
“With the traditional view of core fixed-income management quickly becoming antiquated in a persistent low-yield environment, investors and advisors must begin looking toward alternative solutions,” Scott Minerd, Chiarman of Investments and Global CIO for Guggenheim Investments, said in the press release.
Currently, GTO includes a hefty 33.8% cash position, along with a large 25.0% weight in money market or cash alternatives. Additionally, the ETF includes 32.8% in Treasuries, 1.1% in mortgage bonds and 7.4% in investment-grade corporate debt.
The portfolio managers will try to generate alpha through duration management, relative valuation, credit analysis, information premiums and trade executions.
“To fully exploit these performance drivers, we combine indepth
macro research, intensive fundamental research and legal analysis, and rigorous risk management,” according to Guggenheim Investments.
The actively managed Guggenheim bond ETF will be better able to shift holdings based on the current market environment, as opposed to traditional fixed-income benchmarks, which are heavily tilted toward low-yielding government-related debt. Specifically, the Barclays Aggregate Bond Index holds about two-thirds of its portfolio in the low-yielding debt.
As the Federal Reserve looks to normalize interest rates, bond ETF investors have shown greater interest in actively managed options that could better adapt to the higher rates.
For instance, the SPDR DoubleLine Total Return Tactical ETF (NYSEArca: TOTL), which launched last year, was the most popular new ETF of 2015 and now has over $2 billion in assets under management. Additionally, the older PIMCO Total Return Exchange-Traded Fund (NYSEarca: BOND) has attracted $2.6 billion in assets.
Max Chen contributed to this article.