IndexIQ Launches Multi-Sector Bond ETF | ETF strategy

IndexIQ has launched a new actively managed fixed income ETF which aims to provide a high level of income by investing in several fixed income sectors globally.

Stephen Cianci (I) and Neil Moriarty (r)co-heads of the global fixed income team at MacKay Shields.

The IQ MacKay Multi-Sector Income ETF (MMSB US) was listed on NYSE Arca with an expense ratio of 0.40%, coming to market with $25 million in initial assets.

The fund is sub-advised by MacKay Shieldsa global asset manager and affiliate member of New York Life Investments that manages over $40 billion in its fixed income portfolios.

The ETF’s day-to-day operations are led by Stephen Cianci and Neil Moriarty, senior managing directors and co-heads of MacKay Shields’ Global Fixed Income team. Cianci and Moriarty collectively have 65 years of experience in the financial services industry, while the pair will also draw on the expertise of teams dedicated to core fixed income, US high yield, taxable municipal bonds and to convertibles.

Stephen Cianci commented: “Our investment philosophy focuses on diversified sources of alpha potential, where it is essential not to rely on one or two levers to seek alpha, but rather to have the ability to discover value in all sectors. We believe fixed income valuations are significantly more attractive and current yields have significantly improved investors’ income profiles.

“As investors have suffered unprecedented declines in bond markets in 2022, we believe this is a compelling entry point for long-term investors as we see more opportunity through management. activated.”

Investment approach

The ETF is largely unrestricted in its ability to invest in all types of fixed income securities, geographies and credit quality; however, the fund will maintain a modified duration that is within one year of the benchmark Bloomberg Barclays US Universal Index.

Eligible instruments include government and agency bonds, municipal bonds, corporate debt, mortgage and asset backed securities, bank loans, convertible bonds, contingent convertible bonds, preferred securities and hybrid instruments. Up to 60% of the portfolio may be invested in bonds rated below investment grade and up to 20% in emerging market issuers. The fund will not take exchange risk against the US dollar in excess of 20% of the total assets of the portfolio.

The portfolio is constructed using a combination of proprietary macro analysis and bottom-up stock selection, including analysis of the apparent ESG risks of issuers.

The fund is the fifth actively managed fixed income ETF co-developed by IndexIQ and Mackay Shields. Three of the existing funds target different segments of the municipal bond market, including the IQ MacKay Municipal Insured ETF (MMIN US), IQ MacKay Municipal Intermediate ETF (MMIT US)and IQ MacKay California Municipal Intermediate ETF (MMCA US)while the IQ MacKay ESG Core Plus Bond ETF (ESGB US) is designed to serve as a core holding in socially responsible fixed income portfolios. Collectively, the four ETFs house approximately $800 million in assets.

Ian Forrest, Head of IndexIQ, added: “We are delighted to strengthen our existing partnership with MacKay Shields with the launch of this new multi-sector approach to the fixed income market. In these uncertain times in the bond market and with the continued demand for actively managed strategies to combat the resulting volatility, it is especially important to provide our clients with a wide range of portfolio solutions that they can use as basic allocations in any market environment.

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