2023 may be drawing to an end, but ETF action continues apace. In a year that looks set to break the record number of ETF launches, one new strategy that launched just this month is seeing strong flows out the gate. The core plus bond ETF, SMTH, launched on December 6th, but has already added $65 million in flows per VettaFi data. That speaks not only to its active approach but also to likely investor demand for fixed income with that active view entering 2024.
SMTH, the ALPS/SMITH Core Plus Bond ETF, actively invests in debt securities of any maturity and credit quality around the world. In doing so, the core bond fund invests in a range of offerings from corporate bonds to convertible bonds, and commercial to residential mortgage-backed securities.
SMTH’s Core Plus Bond ETF Approach
Including junk bonds capped at 20%, the core plus bond ETF’s adviser considers factors like credit rating, liquidity, duration, and more with a bottom-up approach. It charges a 59 basis point (bps) fee for its approach, benchmarked against the Bloomberg U.S. Aggregate Bond Index. The strategy also aims for a weighted average effective duration within 40% of the benchmark, as well.
So which investors may want to take a closer look at SMTH? As per its name, it looks to offer a core exposure to fixed income with a total return twist. Investors can find excitement and comfort in its active approach. The core plus bond ETF’s bottom-up approach can avoid debt offerings that go too far, while still looking out for opportunities with strong upside. In a year that has seen active ETFs do well and gain notice, SMTH’s active approach may add to its appeal.
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Right now, per VettaFi data, the strategy’s top three allocations include cash, sovereign debt, and corporate debt. With a new year approaching and the interest rate outlook shifting constantly, an active bond ETF like SMTH could be one to watch with its strong flows momentum.
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