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SPDR® DoubleLine Short Duration Total Return Tactical ETF (STOT) – Q1 2023 Commentary

For the first quarter of 2023, the SPDR DoubleLine Short Duration Total Return Tactical ETF (STOT) performed in line with the Bloomberg U.S. Aggregate 1-3 Year Index.

May 9, 2023

Performance

For the quarter ended March 31, 2023, the DoubleLine Short Duration Total Return Tactical ETF performed roughly in line with the Bloomberg U.S. Aggregate 1-3 Year Index return of 1.51%. After suffering one of the worst years in history, bond markets rallied in the first quarter of 2023, despite markedly elevated volatility. Coming off the January rally, US Treasurys sold off in February before retracing substantially in March amid the banking system turmoil. Although the full impact remains to be seen, the Federal Reserve stepped in to strengthen confidence in the banking system with the creation of its new Bank Term Funding Program. This helped reduce investor worries that bank failures, most notably Silicon Valley Bank, could lead to a broader contagion. The Federal Reserve raised its Federal Funds Effective policy rate by 50 basis points (bps) over the quarter, and the 2-year Treasury yield fell 40 bps, the 5-year fell 43 bps, and the 10-year fell 41 bps.¹

Every sector in the portfolio generated a positive return, led by shorter-duration structured-credit, such as asset backed securities, commercial mortgage-backed securities (MBS), and collateralized loan obligations (CLOs). These assets enjoyed spread tightening, high levels of monthly interest income, and some duration-related price gains. US Treasurys generated the smallest positive return over the quarter as rates rose at the shorter end of the curve.

Standard Performance

	As Of	QTD (%)	YTD (%)	1 Year (%)	3 Year (%)	5 Year (%)	10 Year (%)	Since Inception (%)	Gross Expense Ratio (%)	Net Expense Ratio (%)
NAV	Mar 31, 2023	1.50	1.50	0.15	0.66	1.20	-	1.18	0.45	0.45
Market Value	Mar 31, 2023	1.48	1.48	0.32	0.70	1.19	-	1.20	-	-
Bloomberg U.S. Aggregate Bond Index	Mar 31, 2023	1.51	1.51	0.24	-0.51	1.21	0.99	1.00	-	-

Inception date: Apr 13, 2016. Source: State Street Global Advisors, as of March 31, 2023.
Past performance is not a reliable indicator of future performance. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quotes. Performance of an index is not illustrative of any particular investment. All results are historical and assume the reinvestment of dividends and capital gains. It is not possible to invest directly in an index. Performance returns for periods of less than one year are not annualized. Performance is shown net of fees. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns relfect all items of income, gain and loss and the reinvestment of dividends and other income as applicable. The market price used to calculate the Market Value return is the midpoint between the highest bid and the lowest offer on the exchange on which the shares of the Fund are listed for trading, as of the time that the Fund's NAV is calculated. If you trade your shares at another time, your return may differ.

Fourth Quarter Fund Positioning

The duration of the fund increased by 0.08 years to finish the quarter at 1.20 years.
The U.S. Treasury allocation increased by 6.0%.
The CLO allocation increased by 1.0%.
The agency MBS allocation decreased by 3.0%.
The non-agency MBS allocation decreased by 2.0%.
The commercial MBS allocation decreased by 0.5%.
The bank loan allocation decreased by 0.5%.
The asset-backed securitiy allocation decreased by 0.5%.
The emerging market debt allocation decreased by 0.5%.

Asset Allocation:

Security Description	Weight (%)
Treasurys	25.77
Collateralized Loan Obligations	13.91
Non-Agency Mortgage-Backed Securities	12.46
Investment Grade Corporates	10.93
Commercial Mortgage-Backed Securities	10.77
Agency Mortgage-Backed Securities	6.31
Bank Loans	6.31
Asset-Backed Securities	4.87
Emerging Markets	4.35
Cash	4.32
Total	100

Source: DoubleLine, State Street Global Advisors. Allocations are as of March 31, 2023 and are subject to change without notice. Asset allocation is a method of diversification that positions assets among major investment categories. Asset allocation may be used in an effort to manage risk and enhance returns. It does not, however, guarantee a profit or protect against loss.

Fund Positioning and Outlook

With decades high inflation in decline and US economic indicators showing increased signs of deterioration, we remain constructive on duration, particularly at the long end of the US Treasury curve. We favor high quality assets in this environment and continue to use paydowns to systematically upgrade the quality of the portfolio’s credit holdings. While corporate defaults have remained below historical averages, downgrade and default activity has picked up in recent months and we see this trend continuing throughout this year with corporate earnings likely to be pressured by slower growth and margin compression. We favor structured credit over corporate credit as we believe it offers more attractive spread levels while benefitting from structural protections such as credit enhancement.

Footnotes

Glossary

Disclosure

Important Risk Information

Investing involves risk including the risk of loss of principal.

The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.

All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

The views expressed in this material are the views of DoubleLine Capital LP through the period ended March 31, 2023. And are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Investments in asset backed and mortgage backed securities are subject to prepayment risk which can limit the potential for gain during a declining interest rate environment and increases the potential for loss in a rising interest rate environment. The Fund is actively managed. The Sub-Adviser’s judgments about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may cause the Fund to incur losses. There can be no assurance that the Sub-Adviser’s investments will produce the desired results. Actively managed funds do not seek to replicate the performance of a specified index. An actively managed fund may underperform its benchmark. An investment in the fund is not appropriate for all investors and is not intended to be a complete investment program. Investing in the fund involves risks, including the risk that investors may receive little or no return on the investment or that investors may lose part or even all of the investment.

The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.

Investing in high yield fixed income securities, otherwise known as “junk bonds”, is considered speculative and involves greater risk of loss of principal and interest than investing in investment grade fixed income securities. These Lower-quality debt securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.

The value of the debt securities may increase or decrease as a result of the following: market fluctuations, increases in interest rates, inability of issuers to repay principal and interest or illiquidity in the debt securities markets; the risk of low rates of return due to reinvestment of securities during periods of falling interest rates or repayment by issuers with higher coupon or interest rates; and/or the risk of low income due to falling interest rates. To the extent that interest rates rise, certain underlying obligations may be paid off substantially slower than originally anticipated and the value of those securities may fall sharply. This may result in a reduction in income from debt securities income.

DoubleLine® is a registered trademark of DoubleLine Capital LP. State Street Global Advisors Funds Distributors, LLC is the distributor for some registered products on behalf of the advisor. SSGA Funds Management, Inc. has retained DoubleLine Capital LP as the subadvisor. State Street Global Advisors Funds Distributors, LLC is not affiliated with DoubleLine Capital LP.

Bloomberg®” and Bloomberg U.S. Aggregate Bond Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by State Street Global Advisors. Bloomberg is not affiliated with State Street Global Advisors, and Bloomberg does not approve, endorse, review, or recommend SPDR® DoubleLine® Short Duration Total Return Tactical ETF. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to SPDR® DoubleLine® Short Duration Total Return Tactical ETF.

The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.

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