AdvisorShares, the Bethesda, Md.-based fund provider known for its actively managed strategies, filed paperwork with U.S. regulators to market a global broad-based income-seeking bond ETF that would go head-to-head with the likes of a $1.7 billion Pimco fund.
The Newfleet Multi-Sector Income ETF (NYSEArca:MINC) will own everything from government to corporate to emerging market to high-yield debt in a portfolio that has an average duration of one to three years. The strategy is similar to Pimco’s Enhanced Short Maturity Strategy ETF (MINT - News), a fund that has gathered $1.69 billion in less than three years.
MINC will rely on Newfleet Asset Management’s credit research to capitalize on some of the most undervalued segments of the bond market, the filing said. Newfleet is a collaboration between a San Francisco-based fixed-income asset manager and one based in Hartford, Conn. The company managed about $8.8 billion in assets at the end of March.
The broad-brush-stroke strategy is designed to generate income while preserving capital and limiting fluctuations in net asset value linked to changes in interest rates, the company said in the filing.
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 hard to find in a single ETF wrapper.
It’s unclear how much MINC will cost or how the portfolio will be segmented, especially as it compares with Pimco’s MINT. MINT, for the record, comes with an annual expense ratio of 0.35 percent.
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 securities.
By comparison, Pimco’s MINT allocates about 3 percent to emerging markets and roughly half of the portfolio is investment-grade credit. 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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