A Solid Start For This Bond ETF

Fixed income exchange-traded funds are hot this year. A combination of favorable fees and the continually accomodative Federal Reserve are prompting advisors and investors to push capital into bond funds.

One of the most popular strategies in the world of bond ETFs remains aggregate or total return ETFs. Those are the ETFs that offer exposure to multiple fixed income asset classes under the umbrella of one fund. Total return bond fund have found massive success in the mutual fund as many of those funds are actively managed and backed by a well-known manager or big-name investment house.

This corner of the bond ETF space is growing thanks to new ETFs such as the Guggenheim Total Return Bond ETF GTO, which debuted in February. While GTO does not come to market with big-name managers, the actively managed ETF is run by the same team that manages Guggenheim Total Return Bond Fund (GIBIX), which is rated five stars by Morningstar and is in the top 1 percent of its Morningstar intermediate-term bond peer group for the trailing three-year period.

Related Link: Be Realistic With Junk Bond ETFs

Other Advantages Of GTO

In addition to being the ETF cousin of a well-known mutual fund, a strategy that has paid dividends for many ETF sponsors, GTO has another advantage over its established rivals: a lower fee. GTO charges just 0.43 percent a year, or $43 per $10,000 invested.

As was recently noted in this space, fees on bond ETFs are taking on added importance as the fixed income market inches toward what could be a low return environment. GTO's fee makes it significantly less expensive than some of the most popular actively managed total return bond ETFs on the market today.

Again, in what could morph into a low return world for bond funds, fees will make a difference and that difference is already apparent as GTO has outperformed one of its marquee rivals since coming to market about three months ago.

GTO, which has a 30-day SEC yield of 2.76 percent and a weighted average yield maturity of 4.61 percent, holds 82 bonds with an average duration of 5.33 years, according to Guggenheim data.

Although GTO holds some high-yield bonds, the bulk of the ETF's credit quality is spread between bonds rated AAA to BBB, most of which are U.S. government agency debt.