John Hancock Investment Management has launched a new actively managed ETF targeting opportunities in the mortgage-backed securities market.
Andrew G. Arnott, CEO of John Hancock Investment Management.
The John Hancock Mortgage-Backed Securities ETF (JHMB US) has been listed on NYSE Arca and comes with an expense ratio of 0.39%.
The fund is sub-advised by John Hancock affiliate Manulife Investment Management and co-managed by David Bees, managing director and portfolio manager; Peter Farley, managing director and senior portfolio manager; and Jeffrey Given and Howard Greene, senior managing directors and senior portfolio managers.
The ETF seeks to provide a high level of current income while outperforming the benchmark Bloomberg Barclays US MBS Index over a full market cycle.
It invests in a range of mortgage-related securities including residential and commercial mortgage-backed securities and to-be-announced mortgage contracts. There is no limit on the fund’s average maturity, while the allocation to securities rated below investment grade will be capped at 20%.
The ETF’s managers first use a bottom-up approach to determine sector allocation by considering each sector’s place in the business cycle, forward-looking trends, and historical and technical factors. They then use bottom-up fundamental research to find individual securities that appear comparatively undervalued.
Up to 5% of the fund’s assets may be used in derivative transactions that seek to reduce risk or obtain efficient market exposure.
John Hancock believes the ETF may complement a core fixed income portfolio by serving as a potential diversifier for longer-duration bonds and corporate credit.
Andrew G. Arnott, CEO of John Hancock Investment Management, said: “The team is highly regarded for its bottom-up sector allocation and security selection process in making investment decisions, and we believe this fund is another strong example of their capabilities for those investors interested in accessing this strategy in an ETF wrapper.”
Steven Deroian, co-Head of Retail Product at John Hancock Investment Management, added: “According to SIFMA, the market for mortgage-backed and other asset-backed securities is large and in demand, representing over $12 trillion which is larger than the investment-grade and high-yield corporate bond markets combined. We’re excited to bring this new ETF to market in a growing category for asset allocators and advisors.”
There are currently very few actively managed MBS ETFs available in the US, perhaps due to the dominance of their lower-cost, passively managed counterparts – the $4.0bn SPDR Portfolio Mortgage-Backed Bond ETF (SPMB US) comes with an expense ratio of just 0.04%, while the $24.8bn iShares MBS ETF (MBB US) costs a little more at 0.06%. Both ETFs track the Bloomberg Barclays US MBS Index.