However, the regulatory filings from Janus and Prudential are for actively managed ETFs, a burgeoning area of the ETF market. According to Bloomberg data, active bond ETFs gathered $4.4 billion in the second quarter of 2018, up from $3.3 billion in the first quarter and $2.9 billion a year ago.
PGIM is awaiting regulatory approval to launch an active high yield bond ETF, while Janus Henderson is planning a mortgage-backed securities ETF. Though the larger actively managed bond ETFs provide exposure to the bond market, such as PIMCO Enhanced Short Maturity Active ETF (MINT 101 Overweight) and iShares Short Maturity Bond (NEAR 50 NR), there are limited assets in active high yield bond strategies and no such products focused on the mortgage market. CFRA thinks there is still a lot of white space for asset managers to launch compelling products.
We think PGIM has expertise in the high yield market it can tap into, with the actively managed and CFRA five-star rated PGIM High Yield Fund (PHYZX 5 *****) performing its high-yield bond mutual fund peer group on a one-, three- and five-year total return basis. Relative to mutual fund peers, the fund incurs more credit risk than peers, but has generated an above-average Sharpe ratio.
Meanwhile, though Janus Henderson does not offer a stand along mortgage mutual fund, Janus Henderson Flexible Bond Fund (JAFIX 10 ***), a CFRA three-star core plus bond offering, recently had 27% of assets in the sector. The fund also holds Treasuries and corporate bonds.
CFRA agrees with Swolfs that we’re going to see more actively managed ETFs come to market as the category is gaining acceptance with advisors, many that still hope to outperform a benchmark to support client goals. We typically begin quantitative coverage of an ETF within three months of its launch and stand ready to educate advisors about the growing universe. Approximately 30% of the ETFs rated by CFRA launched since the end of June 2015.
CFRA will be hosting a webinar on July 25 at 11am ET titled Active Mutual Funds vs. Index ETFs: 2018 Click here to Register TODAY!
Todd Rosenbluth is Director of ETF & Mutual Fund Research at CFRA.