Jeffrey Gundlach’s DoubleLine Capital plans to launch a new fund that will use an index based on the work of Yale economist and Nobel laureate Robert Shiller in a bid to beat the S&P 500 and provide income.
The Los Angeles, Calif.-based bond shop has filed with the Securities and Exchange Commission (SEC) for a new closed-end vehicle, the DoubleLine Shiller CAPE Enhanced Income fund.
The fund will gain exposure, through derivatives or directly, to the Shiller Barclays CAPE US Sector index. It will also use a bond portfolio to collateralize its derivative exposure and generate income, and will sell call options on the plain S&P 500 index to generate additional income.
Shiller developed the cyclically adjusted price to earnings ratio (CAPE), also known as the Shiller P/E, a ratio of the price of the stock over its average 10-year earnings, adjusted for inflation. The measure is used to assess likely future returns from stocks over the long term.
This work inspired the Shiller Barclays CAPE US Sector index, which divides its universe of stocks into 11 sectors, selects the five most ‘undervalued,’ those with the lowest CAPE ratio, removes the sector with the lowest 12-month return and tracks the remaining four.
That incorporates a simple momentum filter to an otherwise value-oriented strategy. But because the index assesses each sector on its own historical terms, it differs from value factor indices, which often have heavy weightings in financials, energy, materials, utilities, and real estate. For example, the Shiller Barclays CAPE US Sector index owned information technology for much of the past five years.
DoubleLine has managed a mutual fund with a similar, if slightly simpler, strategy, the DoubleLine Shiller Enhanced CAPE fund (DSEEX), for more than six years. The existing fund, managed by Gundlach (pictured) and Jeffrey Sherman, collateralizes a portfolio of bonds to gain exposure through derivatives to the Shiller Barclays CAPE US Sector index. It doesn’t have an options strategy like the new offering will.
DoubleLine Shiller Enhanced CAPE, which has $9.5bn in assets under management, returned 18.8% on an annualized basis for the five-year period through May 2021, landing it in the top 3% of funds in Morningstar’s Large Blend category and outpacing the S&P 500 by around 1.5 percentage points.
The firm also offer the $86.4m DoubleLine Shiller Enhanced International CAPE fund. Launched in 2016, it follows the same strategy as its older sibling, but uses the Shiller Barclays CAPE Europe Sector index and aims to outperform the MSCI Europe index rather than the S&P.
The new fund will be managed by Gundlach, Sherman, and Jeffrey Mayberry.
DoubleLine declined to comment on the SEC filing.
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June 18, 2021 at 12:05AM
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DoubleLine plans sequel to successful Shiller strategy - Citywire USA
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