Specifically, both AGGE and AGGP adhere to a momentum investing strategy where momentum is measured by comparing a short-horizon, 45-day moving average of returns to longer-horizon, 90-day moving average of returns while taking into account recent volatility in each sector. Moreover, the underlying indices weigh each of the fixed-income sectors based on the total return momentum of each sector.
The ETFs employ “a momentum methodology to dynamically allocate assets across U.S. fixed income sectors, overweighting sectors with high momentum and underweighting sectors with low momentum,” according to IndexIQ.
AGGE will act as a core bond position, providing exposure to U.S. Treasuries, U.S. investment grade corporate bonds and U.S. investment grade mortgage-backed securities. Current weights include investment-grade corporate debt 49%, long-term government debt 11.0%, short-term U.S. Treasuries 9% and mortgage-backed securities 9%.
AGGP, like its appellation suggests, provides access to core positions similar to AGGE “plus” up to 25% in U.S. high yield debt and up to 5% in U.S. dollar denominated debt of emerging market issuers. Current weights include investment-grade corporate debt 31%, high-yield debt 25% mortgage-backed securities 14%.
The strategies are rules-based fixed income ETFs that seek to outperform the broad, U.S. taxable, fixed income markets with comparable levels of risk, according to IndexIQ.
For more information on fixed-income strategies, visit our bond ETFs category.