At a time when investors are thirsting for income, robo-advisor SoFi in partnership with Tidal ETF Trust has filed with the Securities and Exchange Commission to trade an actively managed fund that will provide investors weekly income.
The ETF, under the trading symbol TGIF, is SoFi’s first bond ETF and will invest primarily in U.S. investment-grade and high-yield bonds with a typical short to intermediate effective duration of less than three years.
Income Research + Management, along with Exponential ETFs, will serve as subadvisors with IR + M providing a bottom-up, fundamental approach to choosing individual bonds. Toroso Investments will serve as the ETF’s investment advisor.
The timing of the introduction, as well as the cost, of the niche ETF are unknown at this time and neither SoFI nor Tidal could comment on either because of the quiet period that follows SEC filings so we asked a few ETF experts for their opinions.
“TGIF is certainly a clever ticker and the weekly income distribution a novel concept in the realm of ETFs, but this strikes me as a bit gimmicky,” said Ben Johnson, director of global exchange-traded fund research at Morningstar. “Using the current 1.14% SEC yield on $IGSB as a crude proxy [the iShares Short-Term Corporate Bond ETF], a $10,000 investment would generate roughly $2.20/week (pre-tax). Many investors would hardly notice the weekly windfall in their accounts.”
Dave Nadig, chief investment officer at ETF Trends, agrees. “They likely still can’t get a yield over 2%, so I’m not sure how much “weekly payout” of that tiny yield is really going to move the needle for advisors. Love the ticker though (grin).”
Still, “demand for active fixed income ETFs has been growing,” said Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, who named four among the largest: MINT (Pimco Enhanced Short Maturity Active ETF), JPST (JPMorgan Ultra-Short Income ETF), FTSM (First Trust Enhanced Short Maturity ETF) and BOND (Pimco Active Bond ETF).
SoFi started out as a college loan refinancing company in 2011, then expanded into personal loans and mortgages, and robo-advisory services and brokerage, offering no-fee trading in stocks and ETFs well before many, though not most, financial firms.
Active vs. Passive ETF Debuts
Bloomberg reports that 2020 marks the first time actively managed exchange-traded fund launches are outpacing index-based offerings launches as more asset managers participate in the ETF space.
Sixty-eight active ETFs have launched year to date in 2020, compared with 63 passive funds. Among the new offerings is Franklin Templeton’s Franklin Liberty Ultra Short Bond ETF (FLUD).
At the same time, ETF closures are accelerating. Through June 22, 128 ETFs and exchange-traded notes have shut down, according to ETF.com. About 20 more are set to close by mid-August, including eight BlackRock iShares ETFs, bringing the total to nearly 150 or twice the number that had shut down by the same time last year and 25% more than shut in 2017, according to ETF.com.
Among the 2020 closures were two themed ETFs from Janus Henderson — SLIM, which invested in companies that treat obesity-related health issues like diabetes, stroke, sleep apnea, high blood pressure, heart disease or cholesterol, and ORG, which invested in companies that service, produce, distribute, market or sell organic foods, beverages, cosmetics, supplements or packaging.