SS&C ALPS Advisors recently launched an active core bond ETF that is worth consideration as investors look for ways to beat the market in a complex economic environment.
Active core bond ETFs have seen outsized flows and attention in recent history as investors navigate uncertainty around interest rates. Skilled active management has the potential to generate returns that beat the market.
“Reading the tea leaves in monetary policy will be challenging in 2024,” Todd Rosenbluth, head of research at VettaFi, said. “Many advisors would prefer to let active bond managers navigate the interest rate environment."
The ALPS/SMITH Core Plus Bond ETF (SMTH ) is actively managed, enabling the fund’s experienced managers to seek the best opportunities in the current market environment. Furthermore, active management allows the fund to navigate inefficient associated within the fixed income space.
SMTH launched late last year and has quickly accreted significant assets under management. The $132 million fund has seen $122 million in net flows since its December 6, 2023 launch.
Under the Hood of ALPS’ Active Core Bond ETF
SMTH invests at least 80% of its net assets in bonds. This can include government notes and bonds, corporate bonds, convertible bonds, commercial and residential mortgage-backed securities, and zero-coupon bonds.
The fund targets a weighted average effective duration within 40% of the current effective duration of the Bloomberg U.S. Aggregate Bond Index. SMTH generates returns utilizing a bottom-up fundamental analysis with a macro overlay. This introduces the potential for lower risk and greater returns than the Bloomberg U.S. Aggregate Bond Index.
The core plus bond ETF can also invest in commercial loans, money market instruments, foreign debt securities, and so-called junk bonds.
Including SMTH, Smith Capital subadvises five strategies in SS&C ALPS Advisors’ fund lineup. However, SMTH is the first strategy offered by ALPS and Smith in an ETF wrapper.
Smith’s investment-centric team averages over 13 years of experience, including previous rising rate environments, according to ALPS. Furthermore, the firm’s results are driven by a process with deep roots in fundamental research, complemented by quantitative validation and the use of technology.
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