Tactical Income ETF Strategies for the Modern Advisor

TOTL provides a higher yield and lower duration than the benchmark Barclays U.S. Aggregate Bond Index, with a smaller standard deviation. Additionally, the active ETF has a greatly diminished exposure to U.S. Treasuries while over-weighting agency MBS, non-agency debt, emerging market bonds, bank loans and high-yield, among others.

Investors have also turned to high-yield debt as a way to cushion against any potential pullback due to rising rates. Additionally, high-yield debt has traditionally shown a greater correlation to equities in a rising rate environment.

Alternatively, investors can look to senior secured floating rate bank loans as a high-yield option that limits rate risk. The actively managed SPDR Blackstone/GSO Senior Loan ETF (NYSEArca: SRLN) provides exposure to senior secured floating rate bank loans.

A senior loan is a private loan taken from an underwriting bank or a syndicate of lenders. The loans are secured in that they are backed by the borrowers’ assets, which act as collateral. If the borrower defaults, lenders have a senior claim on the defaulters’ assets. Moreover, senior secured floating-rate loans have, as their name suggests, a floating interest rate component, which fluctuates with market rates.

Financial advisors who are interested in learning more about fixed-income strategies in the current market environment can register for the Thursday, March 9 webcast here.