Fixed-income investors are searching far and wide to adapt their portfolios to a rising rate environment. One option that merits consideration is a little known actively managed bond exchange traded fund strategy that has been quietly outperforming.
In the two-year period since the ETF’s inception on February 26, 2015, the iShares Edge U.S. Fixed Income Balanced Risk ETF (BATS: FIBR) has returned 5.35%. In contrast, the iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG), which tries to reflect the performance of the widely observed Bloomberg Barclays U.S. Aggregate Bond Index, gained 2.31% over the same two-year period.
The actively managed FIBR has increased 4.4% over the past year and was up 0.8% year-to-date. In contrast, AGG is 0.7% higher over the past year and gained 0.7% year-to-date.
The iShares Edge U.S. Fixed Income Balanced Risk ETF seeks to balance interest rate risk and credit risk, the two primary drivers of bond returns. Additionally, the active ETF also helps address investors’ need for income and their concern about rising rate risks ahead.