The objective of this model is to generate an interest yield in excess of the Barclays Capital Aggregate Bond Index while keeping the weighted average duration below that of the Index. One hundred percent of the model is invested in Fixed Income ETFs with a bias to taking credit risk vs. duration risk. Moreover, the model targets a global footprint and considers international and emerging market fixed income ETFs . The weighted average credit risk profile of the model is a notch below investment grade.


Global Fixed Income model: Core-Satellite Implementation

A Core and Satellite approach has been used to build this model, with the Core including low cost, market capitalization weighted domestic fixed income ETFs like GNMA and SJNK. The Satellite allocation seeks to include ETFs that track alternative indices, attempting to add alpha over the Core indices. Examples include local currency emerging markets sovereign bonds, global high yield bonds, Latin America corporate bonds, senior bank loans, etc.


Global Fixed Income Model Duration vs. Yield (10/17/2022)

Duration vs. Yield Tradeoff Model ETF Proxy: BNDW
Weighted Average Duration 3.2 7.2
Yield to Maturity 5.8% 4.1%
Index: Bloomberg Barclays Global Aggregate Float Adjusted Composite Index

Global Fixed Income Model Cost Summary

  • The weighted average cost of the Global Fixed Income Model is 0.43%*
  • This compares very favorably to the Morningstar Category Average of Global Bond Mutual Funds expense ratio of 0.88% (Source: Morningstar Direct)
  • This is a reduction of 52% when compared to active money manager costs!
  • This is particularly important in light of the fact that over the last five years ending Dec’18, only 42% of Global Income Mutual Funds beat their benchmarks (per SPIVA Scorecard, Year End 2018)


*As of 10/17/22.  The Model Weighted Average Net Expense Ratio applies only to the portion of the model that is comprised of mutual funds and/or ETFs. It reflects expense waivers or reimbursements from the fund companies, which may not be permanent. The data used to calculate the Model Weighted Average Net Expense Ratio is obtained from a third-party data provider and is believed to be accurate, but has not been verified by Envestnet. The Model Weighted Average Net Expense Ratio will only be shown if fund expense ratios are available on all mutual funds and ETFs used in the model.