2013 is turning out to be a year of innovation for the ETF industry, bringing the total number of funds just over 1,500. While investors are looking for portfolios with unique strategies, there has also been a rising trend of ‘getting back to basics’ for issuers, as many have looked to round out lineups and plug any weak spots (Read: FlexShares Launches Global Infrastructure ETF).
While there has been a number of new fund launches this year that offer innovative strategies in exchange-traded form, at this time ALPS, which includes 2 dividend dogs fund (SDOG - ETF report) & (IDOG - ETF report) has recently added an income fund to its ETF lineup, the RiverFront Strategic Income Fund (RIGS - ETF report) .
RIGS, an actively managed fund, has its foundation based on the principles of the RiverFront Strategic Income Group, which is guided by an investment philosophy that embraces the dynamic nature of the complex global markets through which it navigates daily.
The product seeks total return, while putting an emphasis on income by investing in a global portfolio of fixed income securities of various maturities, ratings and currency denominations (Read: ALPS Launches New Income ETF).
The Fund intends to utilize various investment strategies in a broad array of fixed income sectors. It may invest in debt instruments which also include convertible bonds and preferred stocks. The product will also invest in high yield bonds as well as in mortgage backed securities (MBS) (Read: 3 Top Ranked Sector ETFs for Earnings Season).
While the average maturity of the fund’s portfolio of fixed income securities will vary based on the Sub-Adviser’s (RiverFront Strategic Income Group) assessment of economic and market conditions, as well as current and anticipated changes in interest rates, the Sub-Adviser intends to manage the fund’s portfolio so that it has an average duration of between two and ten years, under normal circumstances.
The product charges investors 22bps in fees annually.
What’s in it for investors?
The strategy which may attract investors is that RIGS aims to generate income by investing in both corporate and government paper of different credit qualities which may be both dollar and non-dollar denominated and aims at various points along the yield curve. Moreover, the fund uses an active trading methodology without costing too much, at least compared to other active options out there (Read: 2 Ways to Short the Dollar with ETFs).
Further, investors may benefit from the global fixed income exposure which the ETF provides, while the Sub-Adviser of the fund will undertake due responsibilities of assessing pertinent economic and market conditions.
The contenders in the space
While there are about 19 ETFs in the category in which RIGS is placed, the product gets a tough competition from Vanguard Total Bond Market ETF (BND - ETF report) , iShares Core Total U.S. Bond Market ETF (AGG - ETF report) and Vanguard Short-Term Bond ETF (BSV - ETF report) . All these 3 funds are passively managed, pretty cheap, and have attracted a huge following among investors.
The fixed income world has been struggling over the past couple of months thanks to the Fed’s taper talks and the growing investor appetite for equities given the surge in stocks as of late (Read: 3 Niche ETFs Crushing the Market).
Investors in the fixed income world are still keeping a close eye on the movement of the funds due to the uncertainty with government policies. While a short-term deal has been reached, undoubtedly we will be back with issues in D.C. before long.
However, this trend could keep the Fed from withdrawing the stimulus, keeping the current bond buying program intact. This may in turn bring the new product (RIGS - ETF report) into focus, suggesting that investors who want a fresh look at income might want to investigate this ETF further.
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