SPDR® DoubleLine® Total Return Tactical ETF (TOTL) – Q4 2023 Commentary
For the quarter ended December 31, 2023, the DoubleLine Total Return Tactical ETF (TOTL) returned 6.34% on a NAV basis.
Performance
Bonds continued to sell off in the fourth quarter before interest rates reached their peak in mid-October. This was followed by a major reversal as rates fell for the remainder of the period on the back of a more dovish tone from the Federal Reserve (the Fed). The rally reverberated through credit markets and risk assets, sending credit spreads largely tighter. US Treasury yields fell, with the 2-year yield falling 79 basis points (bps), the 10-year yield falling 69 bps, and the 30-year yield falling 67 bps.
Every sector in the portfolio generated a positive return, with the largest contribution coming from US Treasurys and agency mortgage-backed securities (MBS), as these longer duration sectors benefitted most from the significant rate rally during the quarter. Non-agency residential MBS was another top contributor to performance as the sector enjoyed high carry and spread tightening while home prices remained resilient. Although still generating positive returns, the fund’s exposure to floating-rate and shorter-duration sectors contributed the least to performance. These sectors experienced less significant price gains than longer-duration, fixed-rate bonds.
Fund Performance
| QTD |
YTD |
1 Year |
3 Year |
5 Year |
10 Year |
Since Inception Feb 23 2015 |
|
|---|---|---|---|---|---|---|---|
| NAV | 6.34% | 5.84% | 5.84% | -2.56% | 0.56% | - | 1.04% |
| Market Value | 6.02% | 5.61% | 5.61% | -2.60% | 0.52% | - | 1.03% |
| Bloomberg U.S. Aggregate Bond Index | 6.82% | 5.53% | 5.53% | -3.31% | 1.10% | 1.81% | 1.29% |
Source: State Street Global Advisors, as of December 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. 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 calculated. If you trade your shares at another time, your returns may differ. It is not possible to invest directly in an index. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and losse and the reinvestment of dividends and other income as applicable. Index performance is not meant to represent that of any particular fund.
Gross Expense Ratio: 0.55% Net Expense Ratio: 0.55%
Fourth Quarter Fund Positioning
- The duration of the fund decreased by 0.23 years to finish the quarter at 5.90 years.
- During the quarter, the team identified opportunities in agency MBS and subsequently increased the fund’s allocation to agency MBS while decreasing its allocation to investment-grade corporates, where spreads appeared less attractive.
Asset Allocation
| Security Description | Weight (%) |
|---|---|
| Agency Mortgage-Backed Securities | 29.60 |
| Treasurys | 20.60 |
| Non-Agency Mortgage-Backed Securities | 17.50 |
| Commerical Mortgage-Backed Securities | 10.20 |
| Investment Grade Corporates | 6.50 |
| Collateralized Loan Obligations | 3.60 |
| Asset-Backed Securities | 3.40 |
| High Yield Corporates | 3.20 |
| Emerging Markets | 2.50 |
| Bank Loans | 1.90 |
| Cash | 0.90 |
| Total | 100 |
Source: DoubleLine, State Street Global Advisors. Allocations are as of December 31, 2023. 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. Allocations are as of the date indicated, are subject to change, and should not be relied upon as current thereafter.
Fund Positioning and Outlook
Yields remain attractive across many fixed income sectors despite the recent momentum shift in the US Treasury market. We believe the risk of a US recession remains elevated, however, the timing of such an event remains unclear. Restrictive monetary policy is likely to persist until economic data deteriorates, although we believe the Fed is nearing the end of its hiking cycle. We favor high quality assets in this environment and continue to utilize paydowns to systemically upgrade the quality of the portfolio’s credit holdings. 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.