Total Return Bond ETF: A flexible core plus approach

We’re cycle-based investors, which means we tilt into credit markets, including off-benchmark sectors like non-investment grade, convertible bonds, loans, and asset-backed securities. That tilt can build a meaningful yield advantage into our portfolio while keeping the average quality at a relatively high level, which is the hallmark of core-plus strategies.

Designed for today’s market
We have a long tradition in investing in significant credit fundamental research across a number of different categories to find those securities that we believe are underpriced. So, really, we’re more than just tilting top down at the various sectors. We’re leaning into the cheapness of each one of those sectors, really pinpointing the bonds that we think trade at attractive risk premiums and building in a security selection, the alpha that can come along with that.

A full discretion profile
This category bears all the hallmarks of a core-plus strategy, including a relatively high investment-grade average quality, a benchmark that is the aggregate index, and a tracking-error focus that seeks to keep our tracking error within range of about 300 basis points or so. A core-plus approach can add a lot of benefits to a fully diversified portfolio, including good carry and a ballast to the more riskier parts of the portfolio, like the equity allocation. And I think what’s important today is when investors think about bonds, while the carry is quite good, they want to access that, there’s also a lot of concerns out there about inflation, budget deficits, and so on. What I think is really compelling about our strategy is that we seek to minimize the market-related risks associated with core plus that’s tied somewhat loosely to an aggregate index, and then seek to really focus on specific or idiosyncratic risk, focusing on specific bonds – credit bonds, in particular – that will go to their own beat and generate returns that are not as dependent on broad macro factors in the marketplace. That’s why we believe our approach is differentiated and can offer diversification relative to other core-plus strategies in the marketplace today.

Investors’ risk tolerance and time horizon
Investors should judge this exchange-traded fund (ETF) over a three-to-five-year investment horizon. The risk profile of our ETF is very consistent with what you would generally expect within the core-plus bond strategy. It just offers a more active and flexible approach. There’s a focus on income generation and total return. It’s a benchmark-agnostic approach, has flexibility for each phase of the credit cycle, a diversified source of risk, and the profile of the risk and transparency and liquidity.