John Hancock Investment Management Files Initial Registration Statement for New High Yield ETF Subadvised by Marathon Asset Management
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Insights
The announcement of a new high-yield ETF (Exchange-Traded Fund) by John Hancock Investment Management is a significant development in the financial services industry. This product launch can potentially attract a diverse investor base looking for higher income streams, particularly in a low-interest-rate environment. The ETF's focus on high-yield corporate bonds, commonly known as 'junk bonds', may appeal to risk-tolerant investors seeking to enhance their portfolio yields.
Given the fund's strategy to invest at least 80% in U.S.-dollar-denominated high-yield bonds, it is critical to assess the timing of the launch. Market conditions, such as interest rate trends and economic outlook, can greatly influence the performance of high-yield bonds. Investors will need to consider the risk-return profile of this ETF, especially since high-yield bonds are more susceptible to default and can be volatile during economic downturns.
It is also worth noting that the ETF will be managed by experienced professionals from Marathon Asset Management, which could be a strong selling point. The firm's expertise in credit analysis and active management may provide an edge in selecting bonds that have the potential to outperform the market, although this also introduces management risk.
The collaboration between John Hancock Investment Management and Marathon Asset Management to create the John Hancock High Yield ETF (JHHY) represents a strategic business move. It leverages Marathon's credit market expertise and John Hancock's distribution platform, potentially enhancing the product's marketability. The active management component of JHHY differentiates it from passively managed high-yield ETFs and may justify higher management fees.
Investors should be aware that high-yield bonds carry a greater risk of default, which is reflected in their below-investment-grade ratings. The ETF's performance will largely depend on the skill of the portfolio managers in credit selection and market timing. A critical factor for investors will be the ETF's expense ratio compared to its peers and the historical performance of Marathon Asset Management in managing high-yield portfolios.
From a financial perspective, the size of John Hancock's ETF suite and its assets under management indicate a strong foothold in the ETF market. The addition of JHHY could diversify their offerings and potentially increase market share, although it will also be subject to market demand and investor sentiment towards high-yield investments.
The filing of an initial registration statement with the Securities and Exchange Commission (SEC) is a crucial legal step in the introduction of a new ETF. This process ensures regulatory compliance and investor protection by providing transparency about the fund's objectives, risks and expenses. The preliminary prospectus is a key document that investors must evaluate to make informed decisions, as it contains detailed information about the ETF's investment strategy and potential risks.
It is important to highlight that the ETF is still awaiting regulatory approval and the registration statement has not yet become effective. This means that any investment in the fund cannot proceed until the SEC declares the registration effective. Moreover, the legal classification of the high-yield bonds as below-investment-grade or 'junk bonds' necessitates a thorough disclosure of the associated risks, as they are more prone to credit risk and market volatility.
Investors should also be cognizant of the legal implications of the fund's investments in terms of tax considerations and the potential for regulatory changes that could affect the high-yield bond market. The legal framework surrounding ETFs is complex and any changes in legislation or regulation could impact the fund's operations and performance.
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As disclosed in the initial registration statement, the objective of the ETF will be to seek to maximize current income. Capital appreciation will be a secondary goal. Under normal market conditions, the fund will invest at least
The ETF will be managed by Louis Hanover, Chief Investment Officer, and Michael Schlembach, Managing Director and Senior Portfolio Manager, Marathon Asset Management.
"Marathon is well-known for its knowledge of the global credit market with decades of expertise in providing solutions across the credit universe. Its rigorous approach to credit analysis and keen understanding of the markets, based on bottom – up research allows for opportunistic investing in assets across the global credit markets," said Steve Deroian, co-head of retail product, John Hancock Investment Management.
"We are excited to expand Marathon's partnership with John Hancock Investment Management by bringing our US high yield strategy to a broad range of investors with JHHY," said Bruce Richards, CEO and Chairman of Marathon Asset Management. "We believe that the combination of John Hancock's strong platform alongside Marathon's expertise in credit make for a compelling value proposition for investors seeking efficient access to the high yield market with the benefit of a proven active manager in the space."
John Hancock Investment Management's ETF suite totals 13 funds with over
* Such corporate bonds are below-investment-grade securities rated from BB+ to D by S&P Global Ratings (S&P) or by Fitch Ratings, Inc. (Fitch) or from Ba1 to D by Moody's Investors Service, Inc. (Moody's), or a comparable rating by any nationally recognized statistical rating organization (NRSRO), or unrated equivalents (also called junk bonds).
A registration statement containing a preliminary prospectus (and statement of additional information) relating to the shares of the John Hancock High Yield ETF has been filed with the Securities and Exchange Commission, but has not yet been declared effective. Information contained herein is subject to completion or amendment. Shares of the ETF may not be sold, nor may offers to buy be accepted, prior to the time the registration statement becomes effective. The information contained in the prospectus (and statement of additional information) is not complete and may be changed.
This communication is not an offer to sell this security and is not a solicitation to buy this security in any state where the offer or sale is not permitted.
Investors are advised to carefully consider the investment objectives, risks, charges, and expenses of an ETF before investing. The prospectus contains this and other important information about the ETF and should be read carefully before investing. A copy of the preliminary prospectus for the ETF may be obtained by calling 800-225-5291.
Investing involves risks, including the potential loss of principal. There is no guarantee that a fund's investment strategy will be successful. Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if an issuer is unable or unwilling to make principal or interest payments. Investments in higher-yielding, lower-rated securities include a higher risk of default. It is possible that an active trading market for fund shares will not develop, which may hurt your ability to buy or sell fund shares, particularly in times of market stress. Trading securities actively can increase transaction costs, therefore lowering performance and taxable distributions. Large company stocks could fall out of favor, and illiquid securities may be difficult to sell at a price approximating their value. The stock prices of small and midsize companies can change more frequently and dramatically than those of large companies. Foreign investing has additional risks, such as currency and market volatility and political and social instability. Liquidity—the extent to which a security may be sold or a derivative position closed without negatively affecting its market value, if at all—may be impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. The use of hedging and derivatives could produce disproportionate gains or losses and may increase costs. Fund distributions generally depend on income from underlying investments and may vary or cease altogether in the future. Shares may trade at a premium or discount to their NAV in the secondary market. These variations may be greater when markets are volatile or subject to unusual conditions. There can be no assurance that active trading markets for the shares will develop or be maintained by market makers or authorized participants. Please see the fund's prospectus for additional risks.
John Hancock ETFs are distributed by Foreside Fund Services, LLC in
Shares of the ETF are not redeemable with the ETF other than in creation unit aggregations. Instead, investors must buy or sell the ETF shares in the secondary market at market price (not NAV) through a broker-dealer. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and may receive less than net asset value when selling.
Statements in this press release that are not historical facts are forward-looking statements as defined by the United States securities laws. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to uncertainties and other factors which are, in some cases, beyond the ETF's control and could cause actual results to differ materially from those set forth in the forward-looking statements.
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Marathon Asset Management L.P. is a leading global asset manager specializing in the public and private credit markets with over
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SOURCE John Hancock Investment Management
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