DoubleLine announced the launch of two actively managed exchange traded funds. The DoubleLine Opportunistic Bond ETF (NYSE Arca: DBND) and the DoubleLine Shiller CAPE U.S. Equities ETF (NYSE Arca: DCPE) begin trading on Tuesday on the NYSE Arca.
DoubleLine CEO Jeffrey Gundlach and deputy chief investment officer Jeffrey Sherman are portfolio managers of both funds.
“As steward of our clients’ investment capital, DoubleLine has diversified its distribution channels to match the preferences of investors and their intermediaries,” said DoubleLine president Ron Redell in a news release. “We are devoted to the clients who count on our existing investment vehicles, including mutual funds, other pooled-capital vehicles and separate accounts, while remaining open to new vehicles that win public endorsement.”
Redell added: “Actively managed ETFs are no longer a niche option among ’40 Act funds. In fact, active ETFs are well on their way to becoming a mainstay for many investors and advisors. We have formed the DoubleLine ETF Trust to serve them with a suite of actively managed ETFs, starting with DBND and DCPE.”
DBND provides traditional daily transparency into the assets held in its portfolio. DCPE uses the ActiveShares semitransparent structure. The prospectus for these funds is available here.
The objective of DBND is to maximize current income and total return by investing, under normal circumstances, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in fixed income instruments or other investments with economic characteristics like fixed income instruments.
DBND can invest across the credit spectrum, including up to 50% in below-investment-grade bonds, and across the capital structure throughout the sectors of the global fixed income universe. Under normal market conditions, the portfolio managers intend to construct an investment portfolio with an average effective duration of no less than two years and no more than eight years.
“After four decades of debt-financed deficits throughout the developed world, fixed income markets stand on the cusp of a sovereign default disaster, an episode that will pose great challenges in risk management but also commensurate opportunities,” Gundlach said. “Already we are seeing forerunners of the next era. These include the reversal of benign interest-rate and inflation regimes, the reordering of productive economic leadership in favor of economies outside the G-7, and notwithstanding the recent strength of the U.S. dollar, mounting challenges to its primacy as reserve currency.”
The investment objective of the DCPE is to seek total return that exceeds the total return of the S&P 500 Index by managing the portfolio to approximate the return of the Shiller Barclays CAPE U.S. Sector TR USD Index. The index incorporates the principles of long-term investing distilled by Dr. Robert Shiller and expressed through the CAPE (Cyclically Adjusted Price Earnings) ratio.
Under normal circumstances, DCPE invests at least 80% of its net assets in U.S. equity securities, including exchange listed common stocks and exchange traded investment companies such as exchange traded funds and exchange traded notes, to obtain exposure to U.S. equity securities.
The CAPE Ratio assesses equity market prices relative to the 10-year average of inflation-adjusted earnings to account for business and market cycles.
The index’s composition is determined monthly. Each month, the index’s methodology ranks 11 U.S. sectors based on a modified CAPE Ratio and a 12-month momentum factor based on total return. The 11 sectors that may be selected by the index methodology are communication services, consumer discretionary, consumer staples, energy, financials, healthcare, industrials, materials, technology, utilities, and real estate. Each sector is represented by a sector ETF that tracks a sector index, which is an ETF in the family of Select Sector SPDR Funds or, in the case of the real estate sector, the iShares Dow Jones U.S. Real Estate Index Fund.
Gundlach and Sherman will hold a webcast on the two funds at 4:15 PM Eastern/1:15 PM Pacific on Tuesday, April 26. Click here to register.
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