The Federal Reserve raised interest rates, albeit modestly, in December, representing the central bank’s only rate hike of 2016. Some fixed income market observers are betting the Fed will boost rates multiple times this year, prompting speculation about a rotation out of bonds into equities.
That does not mean investors should eschew bonds altogether. In fact, active management could be advantageous in the current fixed income environment.
Tthe SPDR DoubleLine Total Return Tactical ETF (NYSEArca: TOTL) has been a popular active bond play for ETF investors. TOTL is an actively managed ETF backed by bond guru Jeff Gundlach and is also seen as an ETF adaptation of the flagship DoubleLine Total Return Fund (DLTNX). DoubleLine and SSGA have also partnered up with the more recently launched SPDR DoubleLine Short Duration Total Return Tactical ETF (BATS: STOT) and SPDR DoubleLine Emerging Markets Fixed Income ETF (BATS: EMTL).
Bond investors who still want to hold onto fixed-income assets in a rising interest rate environment ahead may consider actively managed strategies that are able to quickly modify holdings to adjust to a changing environment.