Guggenheim Files for Short Duration High Yield Active ETF

by: Shishir Nigam

Guggenheim, the parent company of Claymore, has filed a registration statement with the SEC, applying for an actively-managed short duration high yield bond ETF. The fund will be called the Guggenheim Enhanced Short Duration High Yield Bond ETF and the proposed ticker has not yet been announced. Guggenheim already has applications for two other actively-managed ETFs with the SEC – the Guggenheim Enhanced Core Bond ETF (NYSEARCA:GIY) and the Guggenheim Enhanced Ultra-Short Bond ETF (NYSE:GSY).

This latest planned fund from Guggenheim will target the high yield bond market, a segment that is seeing record amounts of issuance and high demand as investors have been moving up the risk curve in their search for incremental yield. At the moment there are 4 ETFs that investors can tap on to access the high yield bond market in the US – iShares iBoxx $ HY Corp Bond Fund (NYSEARCA:HYG), SPDR Barclays Capital High Yield Bond ETF (NYSEARCA:JNK), PowerShares Fundamental High Yield Corporate Bond Portfolio (NYSE:PHB) and Peritus High Yield ETF (NYSEARCA:HYLD). Only AdvisorShares’ recently launched HYLD is actively-managed, with remaining 3 being passive ETFs. HYLD launched on Nov 30 and has since gathered $15 million in assets.

Guggenheim’s planned high yield bond fund will target the shorter end of the market and will have a duration of less than 1 year. This is a key difference from existing ETFs covering high yield bonds, most of which have effective durations ranging between 4-5 years. As such, investors wanting to access the shorter end of the high yield bond market can look to Guggenheim’s planned fund. With regards to the active management of the fund, the management process is intended to be highly flexible and responsive to market opportunities. The fund’s advisor, Guggenheim Funds Investment Advisors, will utilize a top-down approach to evaluate investment themes and relative value while using bottom-up credit research to select individual securities. The fund is allowed to invest up to 20% of the fund in bank loans as well, while limiting exposure to securities of any one issuer to 2-3%.

Day-to-day portfolio management of the fund will be done by Patrick L. Mitchell, who joined Guggenheim as a Managing Director in 2009. The proposed fee structure for the fund has not yet been disclosed.

Disclosure: No positions in above-mentioned names.

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