Alternative asset manager Kingsbarn Capital Management launched the actively managed Kingsbarn Dividend Opportunity ETF (NYSE Arca: DVDN). The ETF targets equities issued by residential and commercial mortgage real estate investment trusts (REITs) and business development companies. The fund seeks to deliver an attractive quarterly dividend while maintaining prospects for capital appreciation.
Mortgage REITs and business development companies generally have low market correlations. They’ve also in aggregate consistently provided investors dividend distributions in the range of 8% to 10%.
DVDN’s portfolio managers model and monitor about 75 companies across five subsectors providing a differentiated investment universe to take advantage of attractive company-specific investment opportunities. The portfolio managers use proprietary bottom-up financial forecasts that provide earnings, dividend, and book value sensitivities to changing macroeconomic conditions.
The fund’s managers will typically select 12-18 companies from three or more of the REIT and/or BDC subsectors that they believe may deliver an attractive dividend that is relatively resilient across various interest rate scenarios.
A Buying Opportunity Within REITs
The launch of DVDN comes at a time when many are seeing a major buying opportunity within the REIT space. Rising rates, falling prices, and increased vacancies could possibly trigger more commercial real estate sales over the next several months.
Bank of America strategist Michael Hartnett called REITs “fascinating to watch.” He noted that, if a recession is averted, establishing long positions in REITs could be rewarding for investors.
Getting Active With ETFs
Active ETFs are gaining momentum. New projections show that the total number of active ETF launches in 2023 are on track to eclipse the record 475 launches in 2021. So far this year, as of October 31, there have been about 391 new ETFs that have been launched, well above the 311 funds that launched at the same time in 2021.
Morningstar’s U.S. Active/Passive Barometer Midyear Report shows that more than half (57%) of actively managed ETFs outperformed their passive counterparts between June 2022 and June 2023. That’s up from 43% in 2022.
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