Doubleline's Jeff Gundlach has entered the ETF business. His DoubleLine Total Return Tactical ETF had a respectable debut Tuesday, trading 600,000 shares, and is also trading respectably today.
This is an active managed bond ETF, with bonds picked by Gundlach's team. It will consist mostly of investment grade debt like U.S Treasurys and various flavors of mortgage-backed securities, but it could also include corporate high yield debt, and even some emerging market debt. This is active management...so Gundlach and his team can change the investment mix.
As for competitors...there aren't many, since active management is very small part of the ETF business. The big kahuna is Pimco's Total Return Bond ETF, with $2.5 billion under management.
At a the recent ETF.com conference in Hollywood, Fla., I asked Gundlach why he wanted to get into the ETF business. Here's what he said: "There's an argument, which I am agnostic on—whether its right or not—that ETFs will ultimately surpass mutual funds. If that's true, I want to be involved, certainly, and not left behind—so it seems like a reasonable category to be getting involved in."
I have many doubts about whether active management will be successful with ETFs, but the man has a point. With the hedge fund model of "2 and 20" (2 percent fee, 20 percent of the profits) under attack, Gundlach is hedging his bets. In general, why should a hedge fund manager who has a successful track record take grief from a few thousand hedge fund clients that you're charging, say, 2 and 20, when you can get 0.55 percent from (potentially) a few hundred thousand investors, or more?
That's the fee: 0.55 percent a year. Is that worth it? It depends on how you feel about Gundlach in particular and active management in general. You can get into Vanguard Total Bond Market ETF and own the whole bond market for 0.08 percent, but the argument is Gundlach has a history of outperforming.
I would also note that this is using a different strategy than Gundlach's Doubline Total Return fund. TOTL has a broader fixed income mandate. They can go to more places, like high yield, emerging market, even bank loans. They think the broader mandate will enable them to generate alpha.