Strive unveils its first ‘anti-ESG’ fixed income ETFs

Aug 16th, 2023 | By | Category: Fixed Income

Strive Asset Management, an ETF issuer specializing in strategies that are “free from politicization”, has introduced two actively managed core fixed income funds.

Matt Cole, CEO and CIO of Strive Asset Management

Matt Cole, CEO and CIO of Strive Asset Management.

The Strive Total Return Bond ETF (STXT US) and Strive Enhanced Income Short Maturity ETF (BUXX US) have been listed on NYSE Arca with expense ratios of 0.49% and 0.25%, respectively.

Both ETFs are managed by Matt Cole, CEO and CIO of Strive Asset Management, who previously oversaw more than $70 billion in actively managed fixed income portfolios at CalPERS, the largest public pension fund in the US.

STXT invests broadly across multiple bond sectors including US Treasuries, government-sponsored and agency debt, municipal securities, corporate bonds, mortgage-backed securities, asset-backed securities, and collateralized loan obligations.

The fund may invest up to 30% of its assets in high yield securities and is expected to maintain a dollar-weighted portfolio duration between two and nine years.

BUXX, meanwhile, invests primarily in structured assets such as mortgage-backed securities, asset-backed securities, and collateralized loan obligations. It is unconstrained in its allocation to high yield securities but aims to maintain a dollar-weighted portfolio duration of one year or less.

Strive’s hallmark investment process aims to unlock value through a commitment to maximizing shareholder value without regard for “non-pecuniary factors”.

According to Strive, research has shown that the adoption of environmental, social, and governance factors within fixed income portfolios can have a negative impact on performance – the firm highlights the Federal Reserve’s estimation that US dollar- and euro-denominated green corporate bonds may offer lower yields than similar conventional bonds. Strive believes this underscores the importance of optimizing investor returns over meeting ‘arbitrary’ sustainability standards.

Reflecting this philosophy, Strive determines the ETFs’ sector allocations and selects securities for the portfolios using a process that is driven solely by credit risk factors and asset prices.

When determining the funds’ sector allocations, Strive generally considers current market conditions, fundamental and technical indicators, interest rates, monetary and fiscal conditions, FOMC outlook, macroeconomic indicators, market liquidity, and geopolitical risks.

To assist with security selection, Strive has partnered with Angel Oak Capital Advisors, an investment firm specializing in the alternative credit space. Angel Oak utilizes fundamental research to identify issuers with the ability to improve their credit profile over time, resulting in both income and potential capital appreciation. The firm’s process considers maturity, yield, rating information, collateral quality, credit support, structure, volatility, and market conditions.

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