Newcomer Rareview Capital rolled out two actively managed ETFs today that invest in fixed-income closed-end funds. The Rareview Tax Advantaged Income ETF (RTAI) and Rareview Dynamic Fixed Income ETF (RDFI) both invest in CEFs via proprietary quantitative models.
RTAI and RDFI come with expense ratios of 1.91% and 2.37%, respectively. Both funds list on Cboe Global Markets, the parent company of ETF.com.
Neil Azous, founder and chief investment officer of Rareview, says that the firm is focused on goals-based investment strategies.
“They seek to combine the traditional benefits of a fixed-income strategy [with] the nontraditional advantages of closed-end funds,” he said, adding that they are both total return funds that aim to provide current income. Azous notes that CEFs are generally high-income investments and can produce added alpha as they usually can be purchased at discounts, which can narrow, providing additional performance.
“Interest rates are at the effective lower bound. Investors are now in a very tough spot,” Azous said. “If you’re looking for high, consistent yield without taking undue risk, these are potential solutions for that.”
He notes that the starting yield in their selection universe is around 8% and says that the firm tries to protect both funds from volatility surges, describing them as “innovative, actively managed, high income ETFs.”
While RDFI can invest in a wide range of fixed-income CEFs such as those falling into the U.S. government, emerging markets and credit categories, RTAI invests primarily in municipal-bond-focused CEFs to take advantage of the tax benefits associated with municipal debt issuances. RDFI relies on top-down macro analysis in constructing its portfolio and can invest up to 30% of its portfolio in other fixed-income ETFs. Meanwhile, RTAI can invest up to 30% of its portfolio in ETFs tied to municipal debt or short-term Treasuries.
At the time of launch, RDFI had 19 holdings, while RTAI had 8.
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