On June 24, Natixis Investment Managers and Loomis Sayles & Company rolled out two new actively managed fixed income funds, the Natixis Loomis Sayles Total Return Bond ETF (LSTB) and the Natixis Loomis Sayles Dynamic Core Plus ETF (LSCP). Both funds launched with an expense ratio of 39 basis points. 

Key Takeaways

• Natixis Loomis Sayles launched two new actively managed fixed income ETFs, LSTB and LSCP, both featuring a 39 basis point expense ratio.
• The funds are designed to provide enhanced returns outperforming the Bloomberg U.S. Aggregate Bond Index.
• The funds leverage the firm’s fixed income expertise from flagship mutual fund offerings with approximately $25 billion in assets, turning these strategies into efficient ETF products.

These funds seek to outperform the Bloomberg U.S. Aggregate Bond Index. This index tracks the performance of the U.S. investment-grade bond market, and primarily holds U.S. Treasuries, corporate bonds, and asset-backed securities. 

Combining Capital Growth With Yield

LSTB invests in a blend of fixed income securities across various maturities and investment ratings. The fund targets a high total return by prioritizing the value of assets at maturity over short-term performance, merging capital growth with consistent yield. 

It targets undervalued bonds by analyzing the fundamental strength of each issuer. In doing so, it seeks to identify bonds with favorable yields and strong price appreciation potential. Investment decisions primarily rely on proprietary research into issuer credit strength. LSTB treats broad interest rate and market movements as important but secondary factors. 

On the other hand, LSCP takes a more disciplined approach. It targets bonds with effective durations of +/- 1.5 years relative to the benchmark. By keeping sensitivity to interest rate volatility closely aligned with the broader bond market, the fund limits the impact of future rate movements. 

LSCP uses a benchmark-aware strategy that spans both the standard benchmark sectors as well as out-of-benchmark ‘Plus’ sectors. The fund uses top-down macroeconomic analysis to determine sector allocations, duration, and portfolio liquidity. Meanwhile, it focuses on bottom-up fundamental analysis to drive security selection. 

These ETFs expand the rapidly growing active fixed income sector, characterized by funds such as the PIMCO Multisector Bond Active ETF (PYLD), which has seen inflows of $4.4 billion this year, and the JPMorgan Core Plus Bond ETF (JCPB), which has seen $4.1 billion in flows over the same period. 

Building Off of Mutual Fund Success

The funds extend Loomis Sayles’ established active bond investing capabilities into ETF vehicles. The launch of these funds reflects the growing investor demand for actively managed fixed income products that combine experienced portfolio management teams with the transparency, tax-efficiency and liquidity of an ETF wrapper. The two strategies are similar to flagship mutual fund offerings from the firm. Those strategies have approximately $25 billion in combined assets, according to a press release. 

For more news, information, and strategy, visit the Fixed Income Content Hub.