First Trust has partnered up with TCW Investment Management to launch an actively managed global bond exchange traded fund to help investors gain exposure to undervalued areas of the market.
The recently added First Trust TCW Opportunistic Fixed Income ETF (NasdaqGM: FIXD) comes with a 0.55% net expense ratio.
The active bond ETF will try to maximize long-term total return by investing in fixed-income securities of any credit quality issued by the “U.S. government or its agencies, instrumentalities or U.S. government-sponsored entities; Treasury Inflation Protected Securities (TIPS); agency and non-agency residential mortgage-backed securities (RMBS); agency and non-agency commercial mortgage-backed securities (CMBS); agency and non-agency asset-backed securities (ABS); domestic corporate bonds; fixed income securities issued by foreign corporations and foreign governments, including emerging markets; bank loans, including first lien senior secured floating rate bank loans (Senior Loans); municipal bonds; and other debt securities bearing fixed interest rates of any maturity. The Fund may also invest in collateralized loan obligations (CLOs), floating rate securities, variable rate securities and Rule 144A securities,” according to the prospectus sheet.
The active ETF can also hold up to 35% of assets in speculative-grade debt securities and up to 20% of assets in securities denominated in foreign currencies.
The fund will be sub-advised by TCW Investment Management Company’s team, including Tad Rivelle, Chief Investment Officer – Fixed Income and Generalist Portfolio Manager; Stephen M. Kane, Generalist Portfolio Manager; Laird Landmann, Co-Director – Fixed Income and Generalist Portfolio Manager; and Brian T. Whalen, CFA, Generalist Portfolio Manager.
“Given the increased market demand for actively managed fixed income ETFs, we believe this offering will provide another means for investors to access our team-based, value approach to managing fixed income portfolios,” Kane said in a note.
The managers will mainly focus on fixed-income assets they believe to be relatively undervalued. TCW’s active approach targets alpha primarily through sector allocation and security selection, and their strategy incorporates duration management, yield curve positioning and opportunistic trade execution.
Additionally, the active ETF will seek to achieve a duration that varies within one year of the portfolio duration of the Bloomberg Barclays U.S. Aggregate bond Index.
“We believe fixed income markets provide significant opportunities for active managers to add value,” Ryan Issakainen, CFA, Senior Vice President and ETF Strategist for First Trust, said in a note.
Top current holdings include U.S. Treasury note 1.875% due 01/31/2022 20.9%, U.S Treasury Note 1.125% due 01/31/2019 14.9%, U.S. Treasury note 2% due 11/15/2016 8.94%, U.S. Treasury bond 2.875% due 11/15/2046 6.77% and Fannie Mae 3.5% due 02/01/2044 5.3%
For more information on new fund products, visit our new ETFs category.