On Wednesday, Infrastructure Capital Advisors released the Infrastructure Capital Bond Income ETF (BNDS).
The main goal of BNDS is to provide high levels of current income for its investors. Secondarily, the fund may look for opportunities to cultivate capital appreciation. The fund has a net expense ratio of 81 basis points.
As the fund’s name and ticker may imply, BNDS primarily looks to execute its strategy by investing in a variety of bonds. This includes muni bonds, government bonds, and corporate bonds. However, among these options, the fund primarily invests in corporates.
Bonds chosen for investment by the fund may be of any maturity or credit quality. This includes junk bonds as well.
To build a portfolio that provides both income and capital appreciation, the team behind BNDS looks for undervalued fixed income securities. To get a better idea of a security’s valuation, the fund uses a proprietary multifactor approach. This approach considers credit premium, liquidity, sector, and relative value, among other factors.
Per the fund prospectus, BNDS has a top-down perspective management approach. As such, the fund will take major macro factors in consideration as it makes investment calls.
Bolstering Fixed Income
Up to 20% of the fund’s net assets may be invested toward equity securities. These equities may be of any particular market cap. That said, the ETF’s equity investments primarily lie in preferred stocks.
As an additional factor for the portfolio, BNDS may engage in the buying and selling of different call and put options. This can help the portfolio move securities, reduce volatility, and help build extra income. Notably, the fund intends to use swap agreements to gain exposure to securities outside of its portfolio.
“There continue to be opportunities to find both alpha and compelling income in the fixed income markets. The key however is in knowing where to look,” said Jay D. Hatfield, Infrastructure Capital Founder, CEO, and portfolio manager. “We believe active management is essential for successful income investing. Through vigilant risk management, and by focusing on interest rate, credit, and call risks, BNDS is poised to benefit from our active management process. I am very excited for us to be introducing BNDS and look forward to all of the conversations we will have with investors and advisors about the role BNDS can play in their portfolios.”
BNDS is just the latest ETF to be launched from Infrastructure Capital Advisors. With the new fund coming to market, Infrastructure Capital Advisors now manages six different ETFs, along with a variety of hedge funds.
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