IndexIQ has launched a new actively managed fixed income ETF which seeks to provide a high level of income by investing across multiple bond sectors globally.
Stephen Cianci (l) and Neil Moriarty (r), Co-Heads of MacKay Shields’ Global Fixed Income team.
The IQ MacKay Multi-Sector Income ETF (MMSB US) has been 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 Shields, a global asset manager and fellow New York Life Investments affiliate which manages more than $40 billion across its fixed income portfolios.
Day-to-day operations of the ETF are headed up 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 within the financial services industry, while the pair will also leverage the expertise of the firm’s dedicated core fixed income, US high yield, taxable municipal, and convertibles teams.
Stephen Cianci commented: “Our investment philosophy focuses on diversified sources of alpha potential, where it is critical to not rely on only one or two levers to seek alpha, but rather have the ability to uncover value across sectors. We believe fixed income valuations are meaningfully more attractive and current yields have greatly improved the income profiles for investors.
“While investors have endured unprecedented drawdowns from the bond markets in 2022, in our view this is a compelling entry point for long-term investors as we see more opportunities through active management.”
Investment approach
The ETF is largely unconstrained in its ability to invest across 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 convertibles, 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 issuers from emerging markets. The fund will not take on currency risk relative to the US dollar in excess of 20% of the portfolio’s total assets.
The portfolio is constructed using a combination of proprietary macroeconomic analysis and bottom-up security selection including analyzing issuers’ apparent ESG risks.
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 within socially responsible fixed income portfolios. Collectively, the four ETFs house around $800 million in assets.
Ian Forrest, Head of IndexIQ, added: “We are thrilled to be building on our existing partnership with MacKay Shields with the launch of this new multi-sector approach to the fixed income market. During uncertain times in the bond market, and the ongoing demand for actively managed strategies to combat this resulting volatility, it’s particularly important to provide our clients with a broad spectrum of portfolio solutions that they can use as core allocations in any market environment.”