How LODI Provides Value in a "Stagflation Light" Environment

LOI is an actively managed ETF. It is subadvised by SLC fixed income, who is an affiliate company of ours here at AAM. They have a vast amount of experience in managing different types of fixed income portfolios with well over 140 billion in assets under management. The value that this particular strategy of theirs is providing in this, what we call, a stagflation light environment is its fundamental bond picking strategy.

Regarding interest rates, to answer that part of the question, LOI actually seeks to stay duration neutral to its benchmark. Typically, its duration tends to hover anywhere from one and a half to two years, so definitely on the lower end of the duration spectrum. The primary value add from that strategy typically comes from that security selection process.

It also comes from the ability for the portfolio managers to stay unconstrained from a sector standpoint, where they can invest in other security types outside of just your typical corporate credit sectors. Think asset-backed securities, commercial mortgage-backed securities, and collateralized loan obligations, also known as CLOS's.

Right now, these sectors are a bulk of the portfolio and where the managers have been taking profits where necessary and then redeploying that capital into higher quality securities within those particular sectors. That's how we feel that the strategy is really able to navigate both sides of the current environment.