Wisconsin-based Madison Investments has unveiled its first fixed income ETF, an actively managed fund that allocates across bond sectors in a bid for superior long-term risk-adjusted performance.
Mike Sanders, Head of Fixed Income at Madison Investments.
The Madison Aggregate Bond ETF (MAGG US) has been listed on NYSE Arca with an expense ratio of 0.40%.
The launch follows on from the debut of Madison’s first two equity ETFs – the Madison Dividend Value ETF (DIVL US) and Madison Covered Call ETF (CVRD US) – which came to market earlier this month.
According to Madison, its ETFs combine risk-conscious investing with an active management approach that is designed to pursue stable income with lower-than-benchmark risk.
The firm will round out its ETF suite in the coming weeks with the addition of a second fixed income product, the Madison Short Term Strategic Income ETF (MSTI US).
Investment approach
The Madison Aggregate Bond ETF is led by Mike Sanders, Head of Fixed Income; and Allen Olson, Portfolio Manager, who collectively have 54 years of investment industry experience.
The fund will typically hold between 100 and 500 individual securities in its portfolio including US Treasuries, corporate bonds, and agency-backed debt. Up to 10% of the portfolio’s assets may be invested in securities with non-investment grade credit ratings.
Seeking to keep current income relatively stable while limiting share price volatility, the ETF will maintain an intermediate portfolio duration within 75% to 125% of the benchmark Bloomberg US Aggregate Bond Index. The benchmark’s duration on 30 June 2023 was 6.31 years.
Madison strives to add incremental return in the portfolio by making strategic decisions relating to portfolio duration, credit quality, sector and industry allocations, and yield curve positioning.
The ETF embodies Madison’s ‘Participate and Protect’ philosophy which aims to balance potential returns with prudent risk management. According to Madison, due to this conservative investment approach, investors in the ETF will participate near fully in market appreciation during bull markets and experience something less than full participation during bear markets compared with investors in portfolios holding more speculative and volatile securities.
Mike Sanders, Head of Fixed Income at Madison Investments, said: “Today’s rising rate environment has revitalized the appeal of bonds for investors looking for yield. MAGG is the first of two funds designed to address the growing demand for dynamic, risk-managed fixed income strategies. We firmly believe active management is essential for getting the most value out of your fixed income allocation.”