State Street Corp. and Jeffrey Gundlach’s DoubleLine Capital LP are teaming up to open their first actively managed bond exchange-traded fund to compete with Bill Gross’s Pimco Total Return ETF.
SPDR DoubleLine Total Return Tactical ETF will invest in fixed-income securities and be run by Gundlach and Philip Barach, Boston-based State Street said yesterday in a filing with the U.S. Securities and Exchange Commission. The fund, if approved, would list on the NYSE Arca exchange.
Gross’s Pacific Investment Management Co. has led the industry in developing actively managed bond ETFs, offering eight funds with $7.9 billion, or about 61 percent of the market, according to data compiled by Bloomberg. The new offering from State Street, the largest U.S. provider after BlackRock Inc., would be the first ETF for Los Angeles-based DoubleLine, which manages about $49 billion in assets through mainly mutual funds and closed-end funds.
“We’ve always been open to the idea of ETFs,” Ronald Redell, president of DoubleLine Funds Trust, said in a telephone interview. “State Street is the best in class among ETF providers.”
Redell declined to comment on the fund’s strategy, citing regulatory restrictions.
The SPDR DoubleLine ETF will invest as much as 25 percent in corporate and sovereign high-yield debt, up to 15 percent in foreign-currency securities, up to 25 percent in non-agency mortgage-backed securities and a maximum of 25 percent in emerging markets, according to the filing.
Gundlach, a bond manager known for specializing in mortgage-backed securities, has produced top returns in his $33 billion DoubleLine Total Return Bond Fund. The fund has returned an annual average of 5.9 percent in the past three years, beating 97 percent of competitors, according to data compiled by Bloomberg.
Gundlach started DoubleLine Capital after being ousted as chief investment officer of TCW Group Inc. in a December 2009 dispute. His first DoubleLine mutual fund was opened in 2010 and assets surged for three years.
Growth at DoubleLine Capital has slowed in the past year as investors steer away from fixed income. The firm is expanding investment products outside the U.S. and has pushed into equities as it seeks to diversify beyond traditional bonds. In April, DoubleLine hired Ignacio Sosa from Pimco for a newly created product-solutions group to open added lines of business, especially overseas.
Gross’s $3.4 billion Pimco Total Return ETF, a variation of his best-known mutual fund, is one of the biggest actively managed exchange-traded products.