Investors are all in on bonds – and specifically bond ETFs. US-listed fixed-income ETFs have seen approximately USD150 billion of investor inflows to date, according to data from Morningstar – a new high point for this time of the year.
As ETF Express recently reported, Morningstar data shows that active ETFs are gaining a sizeable share of those inflows. Actively managed ETF assets grew to a record USD889 billion, up from USD714 billion at the start of this year. Investors are hoping to participate in the bond rally and use the tax-advantaged ETF wrapper to boost income generation in their portfolios.
The LHA Risk-Managed Income ETF (RMIF) from Little Harbor Advisors is an actively managed ‘fund of funds’ that provides exposure to a broad range of fixed income asset classes. The fund launched in June of last year with USD30 million of seed financing. Current assets are approximately USD32.8 million. Year to date total return is +3.45 per cent. Total operating expense is 1.38 per cent.
John Hassett, CEO of Little Harbor Advisors, tells ETF Express that the fund emerged out of the firm’s accelerator program. Little Harbor Advisors works with sub-advisory managers that offer strategies in separately managed accounts and can help them offer the strategy in an ETF wrapper, while being able to bring over their existing investment track record. Little Harbor also includes a dedicated internal marketing team as part of its accelerator to support adoption of the ETFs it launches.
RMIF’s sub-adviser, Grimes & Company, Inc, invests across fixed income asset classes including investment-grade US corporate bonds; US Treasury securities; floating rate debt securities; treasury inflation-protected bonds; foreign corporate debt securities; high yield bonds; mortgage-backed and asset-backed securities, and preferred stocks. The sub-adviser then ranks its potential investments based on price and volatility factors, choosing the highest yielding of the lot for inclusion in the fund.
Hassett says that making the decision to start with a significant amount of seed financing and an established track record has helped the fund gain a foothold in a crowded active fixed income category. “Baskets are being created and we’re seeing some momentum among the advisory community,” he says.
Little Harbor made the decision to focus on actively managed strategies like RMIF in an effort to stand out from the Vanguards and JP Morgans of the world. “We want to avoid the style box,” he explains. “We’d rather provide value around the style box strategies by offering something that can be used tactically. Which is the hallmark of our existing lineup.” RMIF is designed to provide access to a diversified mix of risk assets Hasset adds.
Hasset anticipates that as advisers and investors continue to be educated on the role actively managed strategies can play in a portfolio that adoption of active ETFs will increase – especially within fixed income. Little Harbor is currently in discussions with three other asset managers that could offer their strategies as part of the Little Harbor lineup in the future.
“We are always looking for managers that we can support,” Hasset says. “But we are very selective, we want to be in this space for the long haul.”
