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Another New Bond ETF Off To A Solid Start

June 9, 2016 3:29 pm
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Many of this year's new exchange-traded funds have been slow out of the gates, with only two truly impressing from an asset-gathering prospective. However, at a time when investors are pouring billions in fresh capital into fixed income funds, some rookie bond ETFs are off to solid starts.

Stoked For STOT

That includes the SPDR DoubleLine Short Duration Total Return Tactical ETF(BATS: STOT). An easy way of looking at STOT is that it is the short duration of the wildly popular SPDR DoubleLine Total Return Tactical ETF (NYSE: TOTL). Sixteen months after coming to market, TOTL has nearly $2.5 billion in assets under management, putting STOT in good stead but also ensuring the new short duration ETF has big shoes to fill.

Related Link: Get In The Know With This ETF

The SPDR DoubleLine Short Duration Total Return Tactical ETF sports a modified adjusted duration of just 1.84 years and an average coupon of 2.14 percent. STOT has a yield to maturity of 1.11 percent. The new ETF is managed by Gundlach; Philip Barach, DoubleLine president; and Jeffrey Sherman, CFA and portfolio manager.

STOT “seeks to maximize total return over a full market cycle through active sector and security selection across a broad range of fixed income securities that could include, among others, securities issued or guaranteed by the US government, foreign and domestic corporate bonds, emerging market bonds and agency and non-agency mortgage backed securities,” according to a statement.

Happy Second Birthday!

STOT is just a few days’ shy of being two months old, but advisors and investors are already warming to the new ETF's story. Perhaps it is just a case of market participants moving to shorter duration fare in anticipation of higher interest rates. Either way, STOT has hauled in $50.8 million in assets since coming to market, making it one of the most successful bond ETFs to debut this year.

Unlike many new ETFs, STOT has been the beneficiary of good timing, coming to market at a time of voracious demand for bond ETFs.

“Fixed income ETFs are taking in assets at a record-setting pace so far in 2016, amassing $15 billion more than at this time last year. Additionally, bond exposures have outpaced equities by $50 billion year-to-date even though the total equity assets under management (AUM) outnumbers fixed income AUM by $1.3 trillion,” said State Street Vice President David Mazza in a recent note.

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