The First Trust TCW Opportunistic Fixed Income ETF (Nasdaq: FIXD) debuted in February and is off to a solid start as inflows to fixed income exchange traded funds approach record heights in 2017.
FIXD attempts 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.
FIXD, which is a partnership between First Trust and TCW Investment Management Company, holds nearly 230 bonds with a weighted average duration of 5.63 years, according to issuer data.
“FIXD is an actively managed ETF that seeks to invest primarily in corporate and government investment grade debt with the capability to carry some high yield and floating rate securities,” reports ETF Daily News. “It can also own derivatives (futures or swaps) to help reduce volatility or control specific risks. The benchmark they are seeking to beat is the Barclays U.S. Aggregate Bond Index and that the expected average duration of the portfolio will likely be within one year of the index.”
The bulk of FIXD’s holdings carry high investment-grade credit ratings as almost 30% of the ETF’s holdings are rated between A- and AAA. Another 10.5% carry BBB+ ratings. While FIXD’s roster tilts heavily toward U.S. government and agency debt, the ETF can hold more exciting fare such as corporate bonds, including a small allocation to junk debt, and international bonds.
“Five months is far too early to pass judgement on the performance of FIXD. However, it has given the manager plenty of time to build out their portfolio so we can peek at what they are up to. The current holdings number 225 with an effective duration of 5.63 years and a 30-day SEC yield of 1.60%. Assets in FIXD have just passed $50 million to-date,” according to ETF Daily News.
FIXD charges 0.55% per year, or $55 on a $10,000 investment.
For more information on Fixed Income ETFs, visit our Fixed Income ETFs category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.