AdvisorShares, the Bethesda, Md.-based fund provider known for
its actively managed strategies, is slated to launch a global
broad-based income-seeking bond ETF on Wednesday that will join the
likes of a $2.78 billion Pimco actively managed fund as well as
The AdvisorShares Newfleet Multi-Sector Income ETF
(NYSEArca:MINC) will invest primarily in investment-grade debt, but
will own everything from government to corporate to emerging market
to high-yield bonds in a portfolio that has an average duration of
one to three years. The fund comes with a total annual cost of 0.75
percent, including 0.65 percent in management fees.
MINC is more than twice as expensive as the Pimco Enhanced Short
Maturity Strategy ETF (NYSEArca:MINT), a fund that has gathered
$2.78 billion in just over three years and costs 0.35 percent, but
the fund is also actively managed, even if it's designed to carry a
higher yield and a longer duration than Pimco's MINT. Others in the
space would include funds like Vanguard's Short Term Bond Fund
(NYSEArca:BSV), but that's a index strategy.
Through Newfleet Asset Management's credit research, MINC sets
out to capitalize on some of the most undervalued segments of the
bond market, the company said in its latest prospectus. Newfleet is
a collaboration between a San Francisco-based fixed-income asset
manager and one based in Hartford, Conn.
The strategy seeks to generate income while preserving capital
and limiting fluctuations in net asset value linked to changes in
interest rates. Demand for income-producing funds has been
strong, especially at a time when interest rates are at all-time
lows. Funds that are global in scope and that diversify the
fixed-income risk across various segments of the bond market remain
relatively hard to find in a single ETF wrapper.
'MINC has a more opportunistic approach [than MINT] by
overweighting and underweighting securities across 14 different
bond sectors, so it's diversified and tactical to manage both risk
and returns,' an AdvisorShares' executive told IndexUniverse. 'Its
opportunistic approach makes it a rather unique offering where
there isn't necessarily a fair active ETF comparison.'
MINC's portfolio will include investment-grade and high-yield
corporate bonds, commercial mortgage-backed securities, residential
mortgage-backed securities, U.S. government and foreign government
debt, and emerging market high-yield bonds, to name a few. As much
as 20 percent of the mix may be allocated to below-investment-grade
MINC's anticipated yield to maturity is roughly 2.7 percent,
with current yield pegged at 3.2 percent and duration at 2.6
By comparison, Pimco's MINT allocates roughly half of the
portfolio to investment-grade credits. MINT also has an effective
maturity of one year, as some 60 percent of the fund is allocated
to zero- to one-year securities.
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