SPDR® DoubleLine® Short Duration Total Return Tactical ETF (STOT) – Q2 2023 Commentary
For the quarter ended June 2023, the SPDR DoubleLine Short Duration Total Return Tactical ETF (STOT) outperformed in the Bloomberg U.S. Aggregate 1-3 Year Index.
Performance
For the quarter ended June 30, 2023, the DoubleLine Short Duration Total Return Tactical ETF’s outperformance of the Bloomberg US Aggregate 1-3 Year Index’s return of -0.36% was driven by asset allocation. The fund carries a larger credit allocation than the index and credit spreads generally tightened during the period. The Federal Reserve raised its effective funds rate by 25 basis points (bps) in May before taking a breather at the June meeting.1 US Treasury yields rose across the curve with the 2-year yield rising 87 bps, the 5-year rising 58 bps, and the 10-year rising 37 bps.2
The largest contributor to performance was collateralized loan obligations (CLOs) as spreads tightened and the sector’s floating-rate nature insulated it from rising rates. Shorter-duration structured credit sectors such as non-agency mortgage-backed securities (MBS), commercial MBS, and asset-backed securities also positively contributed to performance as these assets enjoyed spread tightening and high levels of monthly interest income. The only detractor from performance was agency MBS as this rate-sensitive sector naturally experienced some duration-related price declines.
Fund Performance
| QTD |
YTD |
1 Year |
3 Year |
5 Year |
10 Year | Since Inception Apr 13 2016 |
|
| NAV | 1.15% | 2.67% | 3.24% | 0.08% | 1.36% | - | 1.30% |
| Market Value | 1.08% | 2.58% | 3.23% | 0.10% | 1.35% | - | 1.31% |
| Bloomberg U.S. Aggregate 1-3 Year Index | -0.36% | 1.15% | 0.52% | -0.92% | 1.08% | 0.97% | 0.92% |
Source: State Street Global Advisors, as of June 30, 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. Curent performance may be higher or lower than that quotes. All results are historical and assume the reinvestment of dividends and capital gains. Visit www.ssga.com for most recent month-end performance. The gross expense ratio is the fund’s total annual operating expense ratio. It is gross of any fee waivers or expense reimbursements. Performance returns for periods of less than one year are not annualized. 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 calculates. If you trade your shares at another time, your returns may differ. It is not possible to invest directly in an index. Index performance does not reflect charges and expenses associated with the fund or brokerage commissions associated with buying and selling a fund. Index performance is not meant to represent that of any particular fund.
Gross Expense Ratio: 0.45% Net Expense Ratio: 0.45%
Second Quarter Fund Positioning
- The duration of the fund decreased by 0.01 years to finish the quarter at 1.19 years.
- The commerical MBS allocation increased by 1%.
- The bank loan allocation decreased by 1%.
Asset Allocation:
Security Description |
Weight (%) |
Treasurys |
27.60% |
Collateralized Loan Obligations |
14.15% |
Non-Agency Mortgage-Backed Securities |
11.60% |
Investment Grade Corporates |
11.41% |
Commercial Mortgage-Backed Securities |
10.87% |
Agency Mortgage-Backed Securities |
5.64% |
Bank Loans |
5.53% |
Asset-Backed Securities |
5.33% |
Emerging Markets |
4.31% |
Cash |
3.57% |
Total |
100% |
Source: DoubleLine, State Street Global Advisors. Allocations are as of June 30, 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 year-over-year CPI inflation sitting slightly below 3% after 12 straight months of decline and leading US economic indicators showing increased signs of deterioration, we remain constructive on duration, particularly at the longer tenors of the US Treasury curve.3 We favor high quality assets in this environment and continue to use paydowns to systematically upgrade the quality of the portfolio’s credit holdings. Corporate default activity has accelerated this year and we expect this trend continue as high interest expenses, slower economic growth, and wage inflation have put additional pressure on corporate balance sheets. We favor structured credit sectors over corporate credit as we believe they offer more attractive spread levels while benefitting from structural protections such as credit enhancement.