Legg Mason, one of the world’s largest asset management firms, has launched a new actively managed exchange traded fund (ETF), the Western Asset Short Duration Income ETF (NASDAQ: WINC).
A short-duration (0-3 years) fixed-income strategy, WINC seeks to generate current income via a diversified portfolio with an emphasis on low interest rate sensitivity, higher credit quality and active credit selection.
“We are pleased to add this exciting new actively managed income-seeking fund, offered in a cost-effective, investor-friendly ETF wrapper,” says Michael C Buchanan, Deputy Chief Investment Officer of Western Asset. “WINC targets short-duration credit exposure while leveraging Western Asset’s global investment capabilities and strong risk management program, employing an active process that is both top-down and bottom-up to help identify attractive credit and income opportunities while actively managing risk. While always opportunistic, we are dedicated to providing investors with a long-term fundamental value discipline.”
“With WINC we can actively manage duration, sector and security selection – providing greater flexibility to respond to dynamic market conditions. The fund’s exposures are 100 per cent US-dollar denominated. They can expand beyond investment-grade corporate bonds to include high-yield bonds, structured securities, emerging market debt and other sectors and securities. This flexibility can allow for enhanced performance, added diversification and improved yield potential.”
At just 29 basis points, WINC is a cost-effective solution to gaining access to actively managed, low-duration, higher credit quality fixed-income exposure with a focus on current income.
As an ETF vehicle, WINC offers intra-day liquidity and can be traded throughout the day. The transparency afforded by the availability of daily holdings may allow investors to make more informed investment decisions. WINC is on a monthly income distribution schedule.
The portfolio managers of the Western Asset Short Duration Income ETF are S Kenneth Leech, Michael C.Buchanan, Ryan K Brist, Blanton Y Keh and Kurt D Halvorson. Performance is reference benchmarked against the Bloomberg Barclays 1-5 Year Corporate Bond Total Return Index.
The fund takes an “all-weather” approach to income, using both offensive and defensive strategies to proactively target higher-quality income opportunities. Having the ability to look beyond core holdings to expand the opportunity set can allow Western Asset to potentially provide attractive income throughout different market cycles.
Providing core exposure within WINC to short-maturity IG corporate bonds – with additional allocations to below-IG (up to 15 per cent), securitised (up to 15 per cent), structured, emerging market and other non-benchmark sectors and securities – can improve yield and diversification. Enhanced diversification helps to defensively position the portfolio and helps mitigate concentration risks.
Employing an active process that is both top-down and bottom-up helps identify unique value opportunities. The bottom-up focus pursued by Western Asset’s team of seasoned analysts includes in-depth and disciplined issue, issuer and subsector selection. Duration management, yield curve positioning and sector exposure, driven by long-term perceptions of economic behaviour and relative valuations, are an integral part of the top-down component.
The types of investments in the WINC fund can include corporate debt securities, including notes, bonds, debentures and commercial paper: fixed-income securities usually issued by businesses to finance their operations. These securities may be secured or unsecured, may be issued by U.S. or foreign entities and may carry variable or floating rates of interest.
The fund may also invest up to 15 per cent of its assets in mortgage-backed securities and asset-backed securities, including collateralised debt obligations. It may invest in Rule 144A securities. The fund may also invest in other short-duration fixed-income securities, such as floating rate loans and structured debt, and in cash or cash equivalents such as money market securities.
Securities in which the fund will invest will be US dollar-denominated, although they may be issued by a foreign corporation or a US affiliate of a foreign corporation, or a foreign government or its agencies and instrumentalities.