Angel Oak Capital Advisors, a fixed income specialist with more than $20 billion in assets under management, has made its ETF debut with the launch of an actively managed fund investing in short-duration structured credit assets.
Ward Bortz, Head of ETFs at Angel Oak Capital Advisors.
The Angel Oak UltraShort Income ETF (UYLD US) has been listed on NYSE Arca with an expense ratio of 0.29%.
Structured credit products are created through a securitization process in which financial assets such as loans and mortgages are packaged into interest-bearing securities backed by those assets.
Well-known types of structured credit products include mortgage-backed securities and asset-backed securities which are the main targeted investments for UYLD. Eligible types of securities include those backed by assets such as credit card receivables, student loans, automobile loans, and residential and commercial real estate.
The ETF may also invest up to 30% of its assets in collateralized loan obligations and may hold smaller positions in US Treasuries and corporate debt.
Security selection is driven by fundamental research with regard to maturity, yield, credit rating, collateral quality, credit support, structure, and market conditions. Angel Oak will aim to diversify risks that arise from position sizes, geography, ratings, duration, deal structure, and collateral values, while also seeking to invest in securities that have relatively low volatility.
The ETF will maintain a dollar-weighted average maturity below two years and a dollar-weighted average duration of less than one year.
According to Angel Oak, the fund will hold sizable positions in non-agency residential mortgage-backed securities and asset-backed securities, allocations that will drive a differentiated yield and potentially even a higher credit quality profile compared to existing short-duration ETFs.
The ETF makes distributions to investors on a monthly basis.
Sreeni Prabhu, CIO of Angel Oak Capital Advisors, commented: “Angel Oak has been a leader in the structured credit investment space for over a decade, and we are excited to bring our unique approach to short-duration structured credit investing to the ETF marketplace. In recent history, there has rarely been an investment opportunity as strong as what we see in the short-duration space to generate yield with the risk profile we are targeting. We are thrilled to launch this ETF at a pivotal moment for investors seeking such strategies.”
To support Angel Oak’s advancement into the ETF industry, the firm hired Ward Bortz in June to serve as Head of ETFs. Bortz previously held the position of Head of Strategy for Fixed Income Factors at Invesco.
Ward Bortz said: “Joining Angel Oak and spearheading the launch of the UltraShort Income ETF was an enticing opportunity because of the firm’s dedicated approach to structured credit assets and the chance to bring a new product to market that we’ve heard investors ask for. We look forward to the success of UYLD and growing Angel Oak’s ETF offerings in the future.”