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A wide variety of products have been launched in the ETF world so far this year by several providers, big and small. Continuing this trend, Eccles Street Asset Management, which is a new player in the industry, looks to launch an active ETF targeting the fixed income ETF space. After all, every player is in a mad rush to tap the income/yields space, thanks to the global growth worries and the subsequent plunge in yields. The Proposed ETF in Focus Eccles Street Event Driven Opportunities ETF revolves around corporate bonds and bank loans having average portfolio duration of about 3-5 years, per the prospectus . Underlying securities will have maturity period within the same time range. The instruments are touted as “event-driven” as these revolve around corporate events. The Eccles Street Event Driven Opportunity ETF will also invest in equities, especially credit-related ETFs and ETNs. How Do These Fit in a Portfolio? The product could be an interesting choice for investors seeking a play in the bond market, which zeros in on high yielding securities. These products are for investors who wish to stay away from stock market volatility while at the same time seek a steady stream of cash flow from their portfolio. Moreover, these products also provide a big jump in yields as compared to treasuries when interest rates remain low. In the current environment, yield hungry investors view high yield corporate bonds as good sources to maximize current income in the form of interest, especially compared to other avenues which have low yields attached. Further, the short-to-intermediate span of the corporate bonds makes the ETF moderately interest-sensitive. With the Fed looking steadfast in its plan to raise the key rate this year, the shorter-end of the yield curve appears dicey. In such a backdrop, the intermediate-term bond ETFs might turn out as good picks. This is not the end though. The issuer is expected to choose less than investment grade securities, but the strengthening of corporate America should provide some cushion against default risks (read: 3 Ultra Safe Bond ETFs to Dodge Market Turmoil ). ETF Competition Peer pressure is presumably tough in the corporate bond ETF space. iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSEARCA: LQD ) heads the space in terms of assets. The fund manages an asset base of over $20 billion, while charging investors just 15 basis points as fees. The fund has returned about 3% so far this year and has a yield of 3.03% (as of January 29, 2015) (read: Best and Worst Bond ETFs Of 2014 ). Another popular choice in the intermediate corporate bond ETF space that could be a threat to the newly filed product is iShares Intermediate Credit Bond ETF (NYSEARCA: CIU ) with an asset base of $6.36 billion. Yield-wise, SPDR Barclays Capital Long Term Corporate Bond ETF (NYSEARCA: LWC ) comes at the top producing 3.74% (as of January 29, 2015) (read: 3 Income ETFs to Watch if Rates Stay Low ). Thus, to garner enough investor confidence, the issuer needs to price its product competitively. The issuer also needs to watch that the yield factor – the main agenda of the product – is competitive. Scalper1 News
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