PGIM launches active core bond ETF

Apr 16th, 2021 | By | Category: Fixed Income

PGIM has expanded its line-up of actively managed ETFs with the launch of a core multi-sector fixed income fund.

Stuart Parker, president and CEO of PGIM Investments.

Stuart Parker, President and CEO of PGIM Investments.

The PGIM Active Aggregate Bond ETF (PAB US) has listed on NYSE Arca and comes to market with $25 million in assets under management.

The ETF is managed by senior members of the multi-sector team at PGIM Fixed Income, one of the world’s largest bond managers with more than $968 billion in assets under management.

This includes Richard Piccirillo, Senior Portfolio Manager; Lindsay Rosner, Vice President, Credit Research; and Stewart Wong, Head of Core Conservative Strategy.

The fund comes with an expense ratio of 0.19%.

Stuart Parker, President and CEO of PGIM Investments, said: “Given the current low-yield environment and potential for increased market volatility, there has been strong client demand for active fixed income solutions. We are pleased to expand our line-up to include a low-cost active core bond ETF that offers alpha potential with effective risk management.”

Investment approach

The fund seeks total return through current income and capital appreciation by investing in a diversified portfolio of US dollar-denominated bonds with investment-grade credit ratings.

Eligible securities include government and agency bonds, corporate debt, and mortgage- and asset-backed securities (including collateralized debt obligations). Up to 25% of the portfolio may be invested in securities issued outside of the US including in emerging markets.

Portfolio construction combines top-down economic analysis with bottom-up research using proprietary quantitative models and risk management.

The fund’s diversification across fixed income sectors is expected to be significantly enhanced compared to its benchmark, the Bloomberg Barclays US Aggregate Bond Index, which is heavily weighted towards low-yielding US government debt.

Within sectors, security selection is driven by a thorough review of industry trends and issuers’ financial health with consideration also being given to factors such as expected total return, yield spread, credit quality, maturity, and risk.

The fund may engage in frequent trading of securities, especially during periods of heightened market volatility, in order to take advantage of opportunities or yield differentials.

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