Beyond Traditional Bonds: A Dynamic Approach to Income with this DoubleLine ETF

Why a Multi-Sector Approach Makes Sense

Conventional allocations often split between investment-grade corporates for stability and high-yield bonds or loans for enhanced returns. Yet credit spreads in different sectors rarely move in lockstep.

When these spreads diverge—tightening in some areas while widening in others—yield opportunities often arise where a rigid model might miss them.

By actively rotating among diverse credit sectors, a multi-sector strategy seeks to optimize income generation and manage risk.

This adaptability is particularly important today, with certain parts of the credit market appearing rich while others remain undervalued.

Meet the DoubleLine Multi-Sector Income ETF (DMX)

DoubleLine, a privately owned firm overseeing nearly USD 92 billion in assets (as of December 31, 2024), manages more than half of that total in credit-focused strategies, supported by a 71-person dedicated credit team with senior portfolio managers averaging 21 years of experience.

DMX combines the expertise of Mr. Cohen, director of  Global Developed Credit team, which invests in investment grade and high yield corporate fixed-income securities, and bank debt; and Ken Shinoda, Chairman of the firm's Structured Products Committee, and lead Portfolio Manager on the non–Agency Residential Mortgage-Backed Securities (RMBS) team.

DMX invests in corporate and securitized debt, and floating-rate bank debt. The ETF seeks to deliver its investment objectives of income and capital appreciation principally through bottom-up security selection and credit underwriting as well as top-down sector allocation.

How DMX Works

• Sector Rotation: Shifting allocations among all sectors of the corporate and securitized credit markets in response to evolving fundamentals.
• Active Credit Selection: Targeting BBB to B-rated securities—areas with potentially higher yields but still avoiding the most speculative corner of the market.
• Duration Management: DMX generally keeps duration in a lower range (between zero and seven years) to reduce vulnerability to interest-rate swings.
• Risk Mitigation & Diversification: Sector exposures are capped at 50% each and single-security exposures at 5%, aiming to contain downside risk.

As of December 13, 2024, DMX holds 34.5% in high-yield corporates, 29.0% in bank loans, 12.1% in CMBS, and 4.8% in investment-grade corporates, with the remainder in ABS, CLOs, RMBS, and cash. Its yield-to-maturity is 6.85%, and its average credit rating is BB+. The fund seeks to outperform the Bloomberg US Universal Total Return Index by 150–300 basis points.

Final Thoughts

As bond markets recalibrate to higher yields and periodic volatility, a strategy that can pivot across corporate, mortgage-backed, and floating-rate sectors may be better positioned to capture emerging opportunities.

By actively managing credit risk and adjusting sector allocations, DMX seeks to avoid blind spots and limit concentration risk, all while targeting competitive yields.

For investors looking beyond a traditional, one-size-fits-all approach to bonds, DMX’s multi-sector framework offers an adaptable path forward in today’s evolving fixed income landscape.

DMX trades on the NYSE and has an expense ratio of 0.49%.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.