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JPST Transfer & Q&A with DoubleLine

September 15, 2022
Scott Thomson

ETF Specialist, DoubleLine Capital

This week we sit down with Scott Thomson at DoubleLine Capital to discuss their recent entry into the active ETF market.

DoubleLine has a long-standing track record as an active asset manager, launching its first investment strategy in 2009. The firm entered the ETF space through a sub-advisory relationship with State Street for NYSE-listed ETF TOTL, which was a powerful draw of investment flows immediately after its launch in February 2015, and added two more ETFs with State Street, STOT and EMTL, in 2016.

What led to the decision to expand to a standalone active ETF lineup in early 2022?

The launch of DoubleLine’s standalone active ETF business reflects our dedication to serving our clients and matching their investment preferences. Mutual funds will always have an important place in the distribution of investment strategies to investors, particularly for actively managed strategies. That said, as evidenced by flows into active ETFs, more long-term investors are gravitating toward ETFs and active ETFs.

With the success of our valued strategic partnership with State Street, DoubleLine has become an established active manager in the ETF ecosystem, and the launch of our own standalone ETF business allows us to bring our full capabilities to clients and launch additional innovative products.

As a global asset manager, what benefits and/or nuances come with operating an active ETF product line-up bring compared to other investment wrappers (i.e., Mutual Funds, CITs, etc.)?

Distribution and capital markets are important differences for asset managers to consider. While the initial learning curve for establishing an ETF business from scratch can be significant, operating ETFs becomes increasingly efficient as a fund’s AUM scales higher, most notably for fund operations and related support functions. As evidenced by our launch of DBND and CAPE this year, we believe the benefits are well-worth the effort.

DoubleLine offers active ETFs with various levels of transparency, why offer both a transparent active ETF (NYSE listed: DBND) and an ETF utilizing the ActiveShares semitransparent structure (NYSE listed: CAPE)? Any early observations on market adoption?

In our experience with clients thus far, the preference between fully transparent and non/semi-transparent ETF structure is less significant than an ETF’s liquidity and trading quality- factors that are key to investors’ ability to efficiently buy or sell shares of the ETF.

Our DoubleLine Shiller CAPE US Equities ETF (ticker: CAPE) is our first semitransparent active ETF. As you pointed out, CAPE utilizes the Activeshares structure. In our partnership with Shiller and Barclays on the CAPE index, protecting the intellectual property of the index is paramount, not only for investors in our CAPE ETF, but also for clients invested in our mutual fund and UCITS products implementing CAPE ratio-based sector allocation in the large-cap equity universe.

As a transparent and actively managed ETF, our DoubleLine Opportunistic Bond ETF (ticker: DBND) discloses holdings daily. Due to the nature of global fixed income markets, we are comfortable with this level of transparency into the ETF’s holdings. We also see potential benefits to the transparent ETF’s liquidity profile through the utilization of custom in-kind baskets in DBND’s share creation/redemption process, particularly as a core fixed income portfolio.

What are the key considerations that investors should contemplate when considering actively managed ETFs?

For investors, it’s critical to understand and evaluate an asset manager’s capabilities, track record and experience managing through market cycles and in periods of significant market volatility. Investors and advisors should also consider the resources an ETF issuer makes available to clients, ranging from the quality of standard fund materials (e.g., fact sheets) to availability of sponsor professionals to assist with questions about a strategy or markets more broadly. The responsiveness and ability of an ETF sponsor to engage with clients, digitally and in person, as well as to support advisors’ businesses are also important considerations.

Lastly, what guidance would you provide sponsors as they consider expanding their product offerings to include actively managed ETFs?

Evaluate the business prospects of launching and growing active ETFs strategically based on sponsor capabilities and competitive advantages. Some asset classes and strategies are less suited to the ETF wrapper, but the decision to launch an actively managed ETF business in today’s environment is akin to considering whether or not to launch a mutual fund in 1980. In the future, with hindsight, I believe that managers will discover carefully planned and thought-out entries into active ETFs proved to make tremendous sense both for their own business and for the success of their clients.

Active ETF Stat Pack

# of Issuers188
# of New Issuers 202238
# of ETFs886AUM ($B)$366.38
# of New Launches 20221543 Yr AUM CAGR63%
Avg. ER0.40%5 Yr AUM CAGR57%
Cash FlowTrading
YTD Cash Flow ($B)$55.20YTD ADV (Shares) 124,865,183
3 Yr Cash Flow$217.00YTD ADV ($)$4.94 B
5 Yr Cash Flow$267.50YTD Avg. Spread (bps)*32.85

Source: Factset & NYSE Internal Database and Consolidated Tape Statistics as of 9/9/2022

*Simple average

Active, Semi-Transparent Update

TickerInceptionNameAUMYTD Flows30 Day Median Spread (bps)ADV (shares)StructureLMMLMMListing
EQOP9/17/20Natixis U.S. Equity Opportunities ETF$9,485,892$1,421,07914.59923NYSE AMSCitadel0.85%NYSE
VNSE9/17/20Natixis Vaughan Nelson Select ETF$10,645,981$5,957,08112.312,054NYSE AMSCitadel0.80%NYSE
VNMC9/17/20Natixis Vaughan Nelson Mid Cap ETF$7,820,914$60213.78642NYSE AMSCitadel0.85%NYSE
ESGA7/15/20American Century Sustainable Equity ETF$106,406,940$(30,074,667)11.3713,392NYSE AMSCitadel0.39%NYSE
MID7/15/20American Century Mid Cap Growth Impact ETF$25,210,653$4,711,59410.834,602NYSE AMSCitadel0.45%NYSE
ESGY7/1/21American Century Sustainable Growth ETF$6,594,482$1,144,3285.53409NYSE AMSCitadel0.39%NYSE
NDVG8/5/21Nuveen Dividend Growth ETF$7,116,832$1,470,4507.453,182NYSE AMSCitadel0.64%NYSE
NSCS8/5/21Nuveen Small Cap Select ETF$5,536,232$6,08410.24321NYSE AMSCitadel0.85%NYSE
NWLG8/5/21Nuveen Winslow Large-Cap Growth ESG ETF$4,743,725$213,6417.994,407NYSE AMSCitadel0.64%NYSE
NUGO9/28/21Nuveen Growth Opportunities ETF$2,395,381,312$(13,199,563)7.09203,598NYSE AMSCitadel0.55%NYSE
SAEF11/16/21Schwab Ariel ESG ETF$11,735,750$5,766,10036.563,814NYSE AMSFlow Traders0.59%NYSE
IWLG6/23/22IQ Winslow Large Cap Growth ETF$5,887,420$520,86021.526,720NYSE AMSCitadel0.60%NYSE
IWFG6/23/22IQ Winslow Focused Large Cap Growth ETF$5,567,730$775,39021.565,166NYSE AMSCitadel0.65%NYSE
FDG4/2/20American Century Focused Dynamic Growth ETF$136,835,224$(15,707,742)9.6326,807ActiveSharesCitadel0.45%Cboe BZX
FLV4/2/20American Century Focused Large Cap Value ETF$217,038,625$(7,502,986)10.198,414ActiveSharesCitadel0.42%Cboe BZX
CFCV5/28/20ClearBridge Focus Value ETF$3,505,450$339,77428.86192ActiveSharesGTS0.50%Cboe BZX
FBCG6/4/20Fidelity Blue Chip Growth ETF$364,061,619$6,697,59823.76129,682Fidelity ProxyGTS0.59%Cboe BZX
FBCV6/4/20Fidelity Blue Chip Value ETF$114,877,698$17,227,72327.6326,953Fidelity ProxyGTS0.59%Cboe BZX
FMIL6/4/20Fidelity New Millennium ETF$57,493,562$(2,686,395)32.2910,015Fidelity ProxyGTS0.59%Cboe BZX
FGRO2/4/21Fidelity Growth Opportunities ETF$66,426,854$27,931,72812.28161,408Fidelity ProxyCitadel0.59%Cboe BZX
FMAG2/4/21Fidelity Magellan ETF$45,229,466$1,216,68911.3616,861Fidelity ProxyRBC0.59%Cboe BZX
FPRO2/4/21Fidelity Real Estate Investment ETF$19,456,534$226,8388.475,985Fidelity ProxyCitadel0.59%Cboe BZX
FSMO2/4/21Fidelity Small/Mid-Cap Opportunities ETF$27,732,848$429,48011.967,031Fidelity ProxyRBC0.59%Cboe BZX
FSST6/17/21Fidelity Sustainability U.S. Equity ETF$5,596,897$1,428,95310.011,224Fidelity ProxyRBC0.59%NYSE
FDWM6/17/21Fidelity Women's Leadership ETF$2,559,830$23511.51597Fidelity ProxyRBC0.59%NYSE
TCHP8/5/20T. Rowe Price Blue Chip Growth ETF$261,856,781$81,148,85010.72127,760T Rowe ProxyVirtu0.57%NYSE
TDVG8/5/20T. Rowe Price Dividend Growth ETF$165,900,129$54,918,60610.3927,250T Rowe ProxyRBC0.50%NYSE
TEQI8/5/20T. Rowe Price Equity Income ETF$97,355,774$45,493,8778.5117,308T Rowe ProxyVirtu0.54%NYSE
TGRW8/5/20T. Rowe Price Growth Stock ETF$39,916,575$6,155,41210.9515,051T Rowe ProxyRBC0.52%NYSE
TSPA6/8/21T. Rowe Price U.S. Equity Research ETF$22,165,180$2,741,51610.212,171T Rowe ProxyRBC0.52%NYSE
IVDG12/22/20Invesco Focused Discovery Growth ETF$633,191$(310,730)10.37354Invesco ModelCitadel0.59%Cboe BZX
IVSG12/22/20Invesco Select Growth ETF$1,041,010$(1,820)9.95350Invesco ModelCitadel0.48%Cboe BZX
IVLC12/22/20Invesco US Large Cap Core ESG ETF$5,867,962$(24,960)15.51,767Fidelity ProxyCitadel0.48%Cboe BZX
IVRA12/22/20Invesco Real Assets ESG ETF$3,263,024$1,085,24030.581,578Fidelity ProxyCitadel0.59%Cboe BZX
Gabelli Love Our Planet & People ETF
GGRW2/16/21Gabelli Growth Innovators ETF$2,425,360$(252,075)70.05505ActiveSharesGTS0.90%NYSE
GAST1/5/22Gabelli Asset ETF$4,379,760$244,38046.84135ActiveSharesGTS0.90%NYSE
FRTY3/1/21Alger Mid Cap 40 ETF$31,700,250$6,256,00042.4421,331ActiveSharesVirtu0.60%NYSE
ATFV5/4/21Alger 35 ETF$9,983,875$(100,250)38.312,004ActiveSharesVirtu0.55%NYSE
REIT2/26/21ALPS Active REIT ETF$18,971,604$(4,738,000)43.395,559Blue TractorGTS0.68%NASDAQ
STNC3/16/21Stance Equity ESG Large Cap Core ETF$43,841,746$9,312,72617.862,710Blue TractorGTS0.85%NYSE
PFUT5/26/21Putnam Sustainable Future ETF$6,984,191$509,02834.71,941Fidelity ProxyVirtu0.64%NYSE
PLDR5/26/21Putnam Sustainable Leaders ETF$6,187,258$6,66313.26199Fidelity ProxyRBC0.59%NYSE
PGRO5/26/21Putnam Focused Large Cap Growth ETF$10,684,827$2,817,52910.071,952Fidelity ProxyRBC0.55%NYSE
PVAL5/26/21Putnam Focused Large Cap Value ETF$48,573,082$31,094,64528.2912,387Fidelity ProxyVirtu0.55%NYSE
HFGO11/9/21Hartford Large Cap Growth ETF$77,798,180$79,114,16928.35144,552Fidelity ProxyCitadel0.59%Cboe BZX
SEMI3/30/22Columbia Seligman Semiconductor and Technology ETF$13,600,124$9,448,10032.2111,655Fidelity ProxyVirtu0.75%NYSE
CAPE4/5/22DoubleLine Shiller CAPE U.S. Equities ETF$77,395,500$81,018,00014.3279,957ActiveSharesCitadel0.65%NYSE
GABF5/11/22Gabelli Financial Services Opportunities ETF$5,471,550$261,40035.22301ActiveSharesGTS0.00%NYSE
BYRE5/19/22Principal Real Estate Active Opportunities ETF$5,660,076$5,497,34814.52,575Fidelity ProxyVirtu0.65%NYSE

Source: FactSet & NYSE Internal Database and Consolidated Tape Statistics as of 9/9/2022

*Simple average

August Active ETF Launches

TickerNameIssuerLaunch DateAsset ClassAUM
CGVConductor Global Equity Value ETFIronHorse Holdings8/1/22Equity$68,370,974
BCDFHorizon Kinetics Blockchain Development ETFHorizon Kinetics LLC8/2/22Equity$1,831,913
DVNDTouchstone Dividend Select ETFTouchstone8/4/22Equity$18,647,325
LCLGLogan Capital Broad Innovative Growth ETFLogan Capital Management Inc.8/8/22Equity$46,797,531
TUSITouchstone Ultra Short Income ETFTouchstone8/8/22Fixed Income$43,920,160
AAPBGraniteShares 1.75x Long AAPL Daily ETFGraniteShares8/9/22Equity$456,315
AAPUDirexion Daily AAPL Bull 1.5X SharesDirexion8/9/22Equity$5,792,523
JGROJPMorgan Active Growth ETFJPMorgan Chase8/9/22Equity$44,144,640
TSLGraniteShares 1.25x Long Tesla Daily ETF GraniteShares 1.25x Long TSLA Daily ETFGraniteShares8/9/22Equity$515,826
TSLIGraniteShares 1x Short TSLA Daily ETFGraniteShares8/9/22Equity$478,550
TSLLDirexion Daily TSLA Bull 1.5X Shares ETFDirexion8/9/22Equity$47,970,526
XUSPInnovator Uncapped Accelerated U.S. Equity ETFInnovator8/11/22Equity$5,808,263
AMIDArgent Mid Cap ETFArgent8/17/22Equity$23,922,609
BPAYBlackRock Future Financial and Technology ETFBlackrock8/18/22Equity$4,466,220
MSOXAdvisorShares MSOS 2x Daily ETFAdvisorShares8/24/22Equity$2,101,268
PDBAInvesco Agriculture Commodity Strategy No K-1 ETFInvesco8/24/22Commodities$10,617,280
BNDINEOS Enhanced Income Aggregate Bond ETFNEOS8/30/22Fixed Income$986,272
CSHINEOS Enhanced Income Cash Alternative ETFNEOS8/30/22Fixed Income$1,002,200
Total - 18 New ETFs

Source: Factset as of 9/9/2022

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