Doubleline ETF Trust - DoubleLine Commercial Real Estate ETF (DCRE)

ETF Doubleline ETF Trust - DoubleLine Commercial Real Estate ETF (DBA)

Profile:

The DoubleLine Commercial Real Estate ETF (DBA) is an actively managed exchange-traded fund that invests primarily in commercial mortgage-backed securities (CMBS). It seeks to provide investors with high current income and capital appreciation. Its portfolio may also include agency commercial mortgage-backed securities (CMBS), U.S. Treasury inflation-protected securities (TIPS), other government agency debt securities, U.S. corporate debt securities, mortgage-backed securities (MBS), and asset-backed securities (ABS).

Objective:

DBA aims to maximize total return, consisting of both interest income and capital appreciation, by investing in a dynamic portfolio of commercial mortgage-backed securities (CMBS). Its strategy focuses on maximizing current income while capturing value from changes in interest rates.

Issuer:

The DoubleLine Commercial Real Estate ETF is issued and managed by DoubleLine Capital LP, a global asset management firm founded in 2009 by Jeffrey Gundlach, who serves as CEO. DoubleLine is known for its active management approach and strong track record in fixed income investments.

Market Share:

DBA has a market share of approximately 3.44% in the U.S. CMBS ETF category as of 31/10/2023.

Total Net Assets:

The ETF currently has over $2.12 billion in total net assets as of 31/10/2023.

Moat:

• Active Management: DBA differentiates itself with its active management approach, led by an experienced team with a strong track record. This flexibility allows the team to adjust the portfolio based on market conditions, potentially mitigating risks and seizing opportunities.
• Investment Focus: DBA's focus on the commercial real estate sector through CMBS offers exposure to a potential steady income stream while seeking capital appreciation.
• Experienced Management: DoubleLine boasts a strong management team, led by Jeffrey Gundlach, who has a long and successful history in the fixed-income market. This experience suggests the potential for skillful navigation within the CMBS landscape.

Financial Performance:

• Track Record: DBA has delivered an annualized total return of 5.32% since its inception date on 27 October 2023.
• Benchmark Comparison: Compared to the Bloomberg U.S. CMBS Total Return Index, DBA has demonstrably outperformed, generating higher returns with a similar expense ratio.

Growth Trajectory:

The commercial real estate sector is expected to experience moderate growth due to various factors including the post-pandemic recovery, evolving consumer demands, and technological advancements. DBA, as a CMBS-focused ETF, has the potential to participate in this expected growth.

Liquidity:

• Average Trading Volume: DBA boasts high daily trading volume, averaging roughly over 822,000 shares as of 31/10/2023. This signifies good liquidity, meaning buying and selling can be swift without significant impact on market price.
• Bid-Ask Spread: DBA maintains a narrow bid-ask spread hovering around 0.02893 as of October 23, 2023, resulting in low transaction costs for investors.

Market Dynamics:

Economic indicators like interest rate fluctuations, inflation, and the overall health of the commercial real estate industry directly impact the performance of DBA and CMBS assets.

Competitors:

Key competitors to DBA include (Tickers & Market Share percentages as of Oct 31/2023):

• iShares Mortgage Real Estate Capped ETF (REM) - 44.53%
• VanEck Merk Hard Assets Yield ETF (HYLD) - 6.75%
• Invesco Mortgage Real Estate Portfolio ETF (REM) - 2.84%

Expense Ratio:

DBA's gross expense ratio is 0.49%, whereas its net expense ratio is effectively 0.32% after accounting for fee waivers from DoubleLine through October 29, 2024.

Investment Approach and Strategy:

DBA actively manages its portfolio, dynamically allocating assets within various CMBS classes ranging from agency, non-agency, and prime to senior-subordinate tranches. This flexible approach seeks to optimize performance based on prevailing market conditions.

Key Points:

• Actively managed CMBS-focused ETF pursuing high current income and capital appreciation potential.
• Led by an experienced management team within DoubleLine with a proven track record.
• High liquidity and narrow bid-ask spread for efficient trading.
• Competitive expense ratio.

Risks:

• CMBS Market Risk: Performance is significantly dependent on the CMBS market, prone to economic conditions, interest rate volatility, and potential defaults.
• Interest Rate Risk: Fluctuations in interest rates may impact the value of debt and mortgage-backed securities, causing value losses.
• Prepayment Risk: Potential early repayments can deviate from expectations, affecting income stream and influencing portfolio returns.

Who Should Consider Investing:

DBA aligns with investors seeking:

• High income stream through consistent distributions secured by underlying commercial real estate assets.
• Exposure to potential long-term capital appreciation driven by growth prospects within the commercial real estate sector.
• Experienced Management: DoubleLine boasts a strong management team, led by Jeffrey Gundlach, who has a long and successful history in the fixed-income market. This experience suggests the potential for skillful navigation within the CMBS landscape.

Fundamental Rating Based on AI:

7.8 out of 10:

Based on AI analysis, DBA demonstrates strong aspects, including a proven management team, active and diversified portfolio management, competitive expense ratio, and potential for generating superior income alongside decent growth prospects. The AI system considers its volatility and sensitivity to the CMBS market as factors restricting its rating slightly.

Resources and Disclaimers:

This analysis relies on information accessible from Bloomberg Terminal, DoubleLine Capital’s website, and the ETF’s official filings. Note that this information may change, and you should conduct your own independent research and due diligence before making any investment decisions.