During the initial weeks of the Covid-19 public health and economic crisis, many short-term bond funds generated disappointing performance for investors. If not for the US Federal Reserve’s efforts to stabilize credit markets, many short-term fixed income investors would likely have been hurt even worse. However, not all short-term bond funds failed to weather the storm. The Loomis Sayles Short Duration Income ETF (LSST) fared well through the worst weeks of the pandemic crisis. We believe the three core tenets of the strategy’s approach to short-term fixed income were reasons for its resilience over this extraordinary period:

  1. Carefully constructed, disciplined risk management.
    The Loomis Sayles portfolio management team has a time-tested risk management process, built decades ago for institutional investors. The team continually enhances this process, combining the judgment and knowledge of skilled sector experts with cutting-edge technology. The team analyzes hundreds of risk scenarios each day to test the potential effects of security downgrades, interest rate changes, and policy actions.
  2. Holding a low percentage of riskier, high yield securities.
    Investors tend to buy diversified1 short-term bond funds with safety being the paramount concern. Avoiding a large capital loss is paramount. In response to this client need, the LSST team aims to keep high yield securities as a low percentage of total assets. According to Morningstar, LSST’s high yield weighting was 2.3% at the end of March 2020. This percentage is lower than the 20 short-term bond funds with the highest allocation to high yield (17.4% as of March 30, 2020) and then the Morningstar® category average (4.8% as of March 30, 2020). This focus on mitigation first and yield generation second aligns with shareholder interests and helped translate to strong relative performance for LSST in March 2020. The most recent performance for LSST can be viewed below.


      High Yield Allocation
    as of March 2020
    March 2020 Total Returns
    LSST (Short-Term Bond Category out of 514 funds)
    2.33%
    -2.33%
    Average of Top 20 Funds with Highest Allocation to High Yield
    17.42%
    -6.95%
    Category Average
    4.85%
    -3.22%

    Source: Morningstar, 2020
    Short term performance may not be indicative of long term results.

    Average Annualized Total Returns (%) as of 12/31/20

    Fund Name & Share Class 1 Month 3 Months YTD 1 Year 3 Years Life of Class 12/27/17
    Natixis Loomis Sayles Short Duration
    Income ETF Fund NAV
    0.39
    1.04
    5.27
    5.27
    3.89
    3.91
    Natixis Loomis Sayles Short Duration
    Income ETF Fund Market Price
    0.51
    1.32
    5.55
    5.55
    3.97
    3.99
    Bloomberg Barclays 1-3 Year U.S. Government/Credit Bond Index2
    0.09
    0.21
    3.33
    3.33
    2.98
    2.97

    Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Investment return and value will vary and you may have a gain or loss when shares are sold. The investment return and principal value of an investment will fluctuate so that an investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For most recent month-end performance, visit www.im.natixis.com.

    Gross expense ratio 0.95%. Net expense ratio 0.38%. As of the most recent prospectus, the investment advisor has contractually agreed to waive fees and/or reimburse expenses (with certain exceptions) once the expense cap of the fund has been exceeded. This arrangement is set to expire on 4/30/2023. When an expense cap has not been exceeded, the gross and net expense ratios and/or yields may be the same.

  3. 80 years of fixed income experience.
    The Loomis Sayles organization was founded on fixed income excellence. The firm has managed fixed income investments for families and institutions for over 80 years. With its strong credit research and risk management, Loomis Sayles is well-positioned to navigate the difficult credit market and the challenges facing the post-pandemic world.
1 Diversification does not guarantee a profit or protect against a loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Asset allocation does not ensure a profit or protect against loss.

2
Bloomberg Barclays 1-3 Year Government/Credit Bond Index is an unmanaged index which is a component of the US Government/Credit Bond Index, which includes Treasury and agency securities (US Government Bond Index) and publicly issued US corporate and foreign debentures and secured notes (US Credit Bond Index). The bonds in the index are investment grade with a maturity between one and three years. You may not directly invest in an index."

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, money market and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

The views and opinions expressed may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary.

© 2020 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

This document may contain references to copyrights, indexes and trademarks that may not be registered in all jurisdictions. Third party registrations are the property of their respective owners and are not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively “Natixis”). Such third party owners do not sponsor, endorse or participate in the provision of any Natixis services, funds or other financial products..

ETF General Risk: Exchange-Traded Funds (ETFs) trade like stocks, are subject to investment risk, and will fluctuate in market value. Unlike mutual funds, ETF shares are not individually redeemable directly with the Fund, and are bought and sold on the secondary market at market price, which may be higher or lower than the ETF's net asset value (NAV). Transactions in shares of ETFs will result in brokerage commissions, which will reduce returns. Active ETF: Unlike typical exchange-traded funds, there are no indexes that the Fund attempts to track or replicate. Thus, the ability of the Fund to achieve its objectives will depend on the effectiveness of the portfolio manager. There is no assurance that the investment process will consistently lead to successful investing. Fixed Income Securities Risk: Fixed income securities may carry one or more of the following risks: credit, interest rate (as interest rates rise bond prices usually fall), inflation and liquidity. Below Investment Grade Securities Risk: Below investment grade fixed income securities may be subject to greater risks (including the risk of default) than other fixed income securities. Foreign and Emerging Market Securities Risk: Foreign and emerging market securities may be subject to greater political, economic, environmental, credit, currency and information risks. Foreign securities may be subject to higher volatility than US securities, due to varying degrees of regulation and limited liquidity. These risks are magnified in emerging markets. Interest Rate Risk: Interest rate risk is a major risk to all bondholders. As rates rise, existing bonds that offer a lower rate of return decline in value because newly issued bonds that pay higher rates are more attractive to investors.

Before investing, consider the fund's investment objectives, risks, charges, and expenses. Visit im.natixis.com for a prospectus or a summary prospectusor a summary prospectus containing this and other information. Read it carefully.

ALPS Distributors, Inc. is the distributor of the Natixis Loomis Sayles Short Duration Income ETF. Natixis Distribution, L.P. is a marketing agent. ALPS Distributors, Inc. is not affiliated with Natixis Distribution, L.P.

Natixis Distribution, L.P. (fund distributor, member FINRA|SIPC) and Loomis, Sayles & Company, L.P. are affiliated.

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