Columbia Threadneedle Investments has announced the expansion of its strategic beta fixed income ETF offerings with the launch of Columbia Short Duration Bond ETF (NYSE Arca: SBND), a short-duration bond strategy focused on generating income in four segments of the debt markets.
SBND tracks the firm’s proprietary Beta Advantage Short Term Bond Index, which provides a rules-based approach to investing that is diversified and weighted toward opportunity rather than indebtedness.
The firm writes that SBND seeks to broaden investors’ income opportunity set by tracking an index resulting in a short-duration portfolio that does not sacrifice yield or take on excessive credit risk. The ETF aims to provide investors with a diversified portfolio of fixed income securities across four income-producing debt segments – US investment grade corporates, US investment grade securitized debt, US high yield, and emerging market sovereign and quasi-sovereign debt – with a balance of yield, quality, and liquidity. SBND’s rules-based indexed investment approach aims to address investor concerns that lowering duration equates to sacrificing yield, regardless of the interest rate environment.
Two-thirds of financial advisers surveyed recently by Columbia Threadneedle agree that the inability to address client needs around yield and diversification is a barrier to investing in specific fixed income products.
“In a challenging interest rate environment, investors may need to adjust their fixed income allocations and broaden their income opportunity set,” says Ronald Stahl, Senior Portfolio Manager and Head of Short Duration & Stable Value at Columbia Threadneedle Investments. “Unlike passively managed short-duration bond funds that track traditional benchmarks, a strategic beta portfolio that tracks a customized, rules-based index designed to mitigate duration risk while capturing higher income opportunities can further diversify and complement client portfolios.”
“Against a backdrop of market uncertainty, we’ve seen investors increasingly use short-term bond funds to simply ‘park’ their assets until they decide what to do next,” added Marc Zeitoun, Head of Strategic Beta at Columbia Threadneedle Investments. “For most, this will result in an unwanted give-up on yield. We believe a cost-efficient and thoughtfully diversified strategy offers a better way to shorten portfolio duration without sacrificing income potential.”
The firm writes that the launch of SBND adds another compelling fixed income strategic beta solution to a lineup that includes Columbia Diversified Fixed Income Allocation ETF (DIAL), launched in 2017, and Columbia Multi-Sector Municipal Income ETF (MUST), launched in 2018. DIAL is a multi-sector bond strategy that targets more consistent income in any market with a rules-based approach that goes beyond the traditional bond market benchmark. SBND complements DIAL in providing investors with a short-duration version of a proven diversified bond strategy. MUST targets higher tax-exempt income and risk-adjusted returns than traditional municipal bond benchmark funds by strategically diversifying across five municipal bond sectors.
All three funds are managed by active fixed income investors whose expertise and insights informed the rules-based approach that underpins each ETF and reflect a commitment to delivering fixed income solutions to meet a variety of investor needs. SBND is managed by Ronald Stahl, Gregory Liechty, and David Janssen. The fund features monthly reconstitution, rebalancing and distributions, and is competitively priced at 25 basis points.
