A Smart Beta Bond ETF Strategy in a Rising Rate Environment

Traditional fixed-income index investments may expose investors to increased credit risks and lower yields. Consequently, more may turn to smart beta index-based exchange traded funds that may diminish risks and potentially enhance returns in a rising rate environment.

ETF Trends publisher Tom Lydon spoke with Martin Kremenstein, Senior Managing Director and Head of NuShares Nuveen, at the Inside ETFs conference that ran Jan. 22-25, 2017 to talk Nuveen’s recently launched ETF alternative to the benchmark Barclays U.S. Aggregate Bond Index, the NuShares Enhanced Yield U.S. Aggregate Bond ETF (NYSEArca: NUAG).

“The strategy which is designed to extract yield from the portfolio within parameters really held up well in the rate volatility following the election,” Kremenstein said.

NUAG seeks to offer enhanced yield relative to the broad, investment-grade fixed income market with comparable risk and credit quality.

“I think all advisors need to look at their fixed income now but can’t not be in bonds,” Kremenstein said. “They have to have a bond allocation and they’re going to have to look it up on allocation to see whether it’s really working for them.”