ALPS Portfolio Solutions has partnered with RiverFront Investment Group to launch two actively managed bond exchange traded funds to help investors diminish downside risks without missing any upside potential.
The actively managed RiverFront Dynamic Core Income ETF (NYSEArca: RFCI) and RiverFront Dynamic Unconstrained Income ETF (NYSEArca: RFUN) will seek total return, with an emphasis on income as a source of that return. Both ETFs have a 0.51% expense ratio.
The RiverFront Dynamic Core Income ETF and RiverFront Dynamic Unconstrained Income ETF will include global fixed-income securities and is constructed through a two-step process. First off, the fund manager selects strategic allocations among different fixed-income assets classes, with an objective being to construct an allocation that is designed to to balance the probability of upside returns with downside risks for investors with a five-year time frame. Secondly, the portfolio is tactically adjusted as market conditions warrant and determines security selection within within asset classes to maximize potential return over time.[related_stories]
Both funds also model historical returns as a function of initial valuation conditions and creates estimates of potential returns and downside risk consistent with historical market behaviors. Additionally, they may implement a mean-reservation optimization process that help determine the weightings of the various fixed-income assets.
RFUN and RFCI may invest in the same universe of investable securities, including US and Foreign government and corporate debt, High yield bonds, Emerging market bonds, Mortgage backed securities (MBS), Commercial mortgage backed securities (CMBS), Asset backed securities (ABS), Convertible bonds, Preferred securities and Municipal bonds.
However, the two funds differ in their maximum caps on foreign exposure. Specifically, RFUN may include up to 50% of assets in securities denominated in foreign currencies and up to 50% of assets in securities of issuers located in emerging markets. RFCI, on the other hand, can only hold 10% of securities denominated in foreign currencies and 10% in emerging market issuers.
Income-minded investors would also be happy to know that the two active bond ETFs provide a monthly payout.
For more information on new fund products, visit our new ETFs category.