In building a diversified investment portfolio, some active money managers are also adopting actively managed exchange traded fund strategies as more become acquainted with the benefits of the ETF investment vehicle.
For example, the actively managed SPDR Blackstone/GSO Senior Loan ETF (NYSEArca: SRLN) is finding fans among Eaton Vance Corp. and Wellington Management Group, reports Rachel Evans for Bloomberg.
Blackstone/GSO, which subadvises SRLN, is backed by one of the largest senior loan asset managers in the world. Senior secured floating-rate bank loans are seen as a way for fixed-income investors to maintain yield generation while hedging rate risk. Since the senior loans have rates that adjust periodically, the floating-rate loans also offer investors an alternative method of earning yields while mitigating interest-rate risk.
Exploring a Bond ETF Strategy
While actively managed strategies make up less than 2% of the $3.6 trillion U.S.-listed ETF universe, ETF providers have tapped managers to look over credit strategies. Many believe that active managers may provide greater value in a bond ETF as they are more capable of navigating the underlying debt markets.
“Spiritually it makes more sense, we reject passive,” Christopher Remington, an institutional portfolio manager at Eaton Vance, told Bloomberg. “In some ways it might seem like a bit of a mind-bender – if you’re an active manager why are you investing in some other active product? – but it’s another part of the investment universe now, the fact that these structures exist, and we can take advantage of that in a way that helps limit our cash drag.”
Interest for the actively managed SRLN has increased in 2018 as the ETF attracted $976 million in net inflows so far this year, outpacing the popularity of other similar passive index-based senior loan strategies.
“The fund resonates well with active managers who are starting to have a bit of an ‘aha moment,’” Bill Ahmuty, head of State Street’s ETF fixed-income group, told Bloomberg. “Their philosophy on this is similar to ours.”
For more information on the fixed-income market, visit our bond ETFs category.