PGIM rolls out ETF version of $56bn total return bond fund

Jan 4th, 2022 | By | Category: Fixed Income

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PGIM Investments has expanded access to its flagship core-plus bond strategy with the launch of the PGIM Total Return Bond ETF (PTRB US) on NYSE Arca.

PGIM rolls out ETF version of $56bn total return bond fund

Stuart Parker, president and CEO of PGIM Investments.

The fund is actively managed and aims to outperform the Bloomberg US Aggregate Index with opportunistic investments in non-benchmark sectors and derivatives.

The fund, which mirrors the strategy behind PGIM’s $56 billion Total Return Bond mutual fund, is managed by Robert Tipp, Michael Collins, Richard Piccirillo, Gregory Peters and Lindsay Rosner – a team with an average of 22 years of experience and 19 years with the firm.

Fund management is backed up by credit analysis, quantitative research and risk management provided by the wider PGIM fixed income team.

Commenting on the launch of the ETF, Stuart Parker, president and CEO of PGIM Investments, said: “PGIM Investments is committed to a vehicle-agnostic approach, offering our strategies in different forms across multiple platforms to meet investors where they are and enabling them to invest the way they want”.

The fund seeks to achieve its objective through a mix of current income and capital return by investing in a diversified portfolio of bonds across multiple fixed income sectors including US government securities, mortgage-related and asset-backed securities (including collateralized debt obligations and collateralized loan obligations), corporate debt securities and foreign debt securities

The fund managers may invest up to 30% of portfolio assets in high-yield debt securities or junk bonds. They may also invest up to 30% of assets in foreign debt securities, including emerging market bonds. Bonds must have a maturity at date of issue of greater than one year.

The fund managers use a combination of top-down economic analysis and bottom-up research in conjunction with proprietary quantitative models and risk management systems. In the top-down economic analysis, the managers develop views on economic, policy and market trends. In their bottom-up research, the managers develop an internal rating and outlook on issuers. The rating and outlook are determined based on a thorough review of the financial health and trends of the issuer.

The managers may also consider investment factors such as expected total return, yield, spread and potential for price appreciation as well as credit quality, maturity and risk.

The fund managers engage in active trading in order to take advantage of new investment opportunities with trading activity expected to be elevated during periods of market volatility.

The fund managers are permitted to use derivatives to manage portfolio duration, as well as to manage the fund’s foreign currency exposure, hedge against losses, and try to improve returns.

As of year-end, the portfolio was very substantially underweight US Treasuries and significantly overweight ABS. It had a weighted average maturity of 10.2 years and a duration of 7.4 years. The 30-day SEC yield was 1.37%.

The fund has a total annual expense ratio of 0.49%.

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