Perhaps the key virtue of active management is its ability to respond to uncertainty — a real asset as concern surrounding banking contagion from Silicon Valley Bank (SVB) roils markets. In a situation that is still evolving, impacting other banks like First Republic Bank (FRC) and adding further confusion for the Fed’s campaign against inflation, investors may want to look to active fixed income ETFs for both yield and for the relative safety provided by debt securities as equities wobble.
Part of the complication for market watchers right now is the added fluctuation in the 2-Year Treasury yield, saw its biggest slide in decades to start the week. Treasurys have been a popular place to be over the last few months, and with the 2-Year Treasury recovering somewhat, one of the active fixed income ETFs to consider may be the Franklin U.S. Treasury Bond ETF (FLGV).
FLGV combines an active approach with a nine basis point fee, and is approaching $400 million in AUM as well as its three-year milestone coming up in June. It has seen its YTD return of 2.6% nearly matched over the last week, according to VettaFi, returning 2.5% in that time and adding $5.2 million in that time. FLGV’s active approach allows it to invest across the U.S. Treasury maturity spectrum from one to thirty years, with derivatives also an option to enhance returns and increase liquidity.
Another option may be the Franklin U.S. Core Bond ETF (FLCB), which is also actively managed and charges just 15 basis points, which compares well for an active fund to some of its passive core bond rivals. Bond valuations have improved, with notable yields available in high-quality government bonds, making a core option with an active, flexible lens a strategy to consider.
FLCB actively invests across investment-grade bonds, including Treasurys but also mortgage-backed debt and corporate bonds among the slew of available debt securities available to investors. FLCB has outperformed both its ETF Database Category Average and its Factset Segment Average by 48 and 45 basis points respectively, picking up $21 million in net inflows over just the last five days.
The bank situation is just the latest wrinkle for investors already watching the Fed’s campaign against inflation and rate hike scheme closely. Actively managed ETFs have started the year well, and for those investors looking for active fixed income ETFs to navigate the moment, the duo of FLGV and FLCB may be worth watching.
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