What You Need to Know
- Harbor Capital has launched its first ETFs — two active, transparent fixed income ETFs.
- Columbia Threadneedle adds a short duration bond ETF, filling out its fixed income ETF offerings.
- FlexShares adds four ESG ETFs: two bond funds and two equity funds, all core passive funds.
The search for yield has led four asset managers to introduce new income-generating ETFs, among them Harbor Capital Advisors, which has joined a growing number of asset managers launching their first ETFs.
The Chicago-based asset manager with $64 billion in assets has launched two actively managed fully transparent fixed income ETFs: the Harbor Scientific Alpha Income ETF (SIFI), which invests in investment-grade and high-yield bonds with a tactical derivative overlay; and the Harbor Scientific Alpha High-Yield ETF (SIHY), which invests in high-yield bonds and seeks a total return topping that of its benchmark, the ICE BofA U.S. High Yield Index.
SIFI has an expense ratio of 0.50%; SIHY, an expense ratio of 0.48%
BlueCove Ltd. is the subadvisor to the new ETFs. The London-based firm bases its portfolio management on what it calls scientific fixed income investing, which involves re-engineering the traditional discretionary investment model in order to eliminate weaknesses.
The investment process is broken down into its objective and subjective component parts with human discretion directed toward the design, construction, and monitoring of the process and quantitative research used to target more objective, disciplined and repeatable risk-adjusted returns. Other firms refer to the approach as a systematic alpha-seeking strategy.
Columbia Threadneedle Adds Short-Term Bond ETF
Columbia Threadneedle Investments, another asset manager adding fixed income ETFs, has expanded its existing lineup of strategic beta fixed income ETFs with the addition of the Columbia Short Duration Bond ETF (SBND).
The ETF focuses on generating income in four segments of the debt markets — U.S. investment-grade corporates, U.S. investment-grade securitized debt, U.S. high yield, and emerging market sovereign and quasi-sovereign debt — by tracking the firm’s proprietary Beta Advantage Short Term Bond Index.
The idea is a portfolio that does not sacrifice yield or take on excessive credit risk.