What does the future hold for fixed income? 2025 has offered some very unique factors to consider with the Federal Reserve pressured to cut rates. That has come while the Federal Reserve and chair Jerome Powell have taken a more cautious approach amid inflation concerns. While the rate curve has somewhat normalized, then, it may be worth refreshing fixed income allocations. The active core bond ETF SMTH can help.
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The Smith Core Plus Bond ETF (SMTH), charges a 59 basis point fee for its active approach. The strategy retains the remit to actively invest in bonds of any maturity and credit quality. As part of its quest for above-average total returns, the ETF looks for a high level of current income and capital appreciation.
Specifically, SMTH applies a bottom-up approach in looking for contending bond opportunities. It looks at areas like government notes and bonds, corporate bonds, convertible bonds, and mortgage-backed securities. Beyond so-called “traditional” bonds, it can also invest in commercial loans, money market instruments, and foreign debt securities in emerging markets. Its managers consider factors like yield, credit rating, liquidity, call risk, and more.
Together, that has helped SMTH return 4.39% YTD, beating its ETF Database Category and FactSet Segment averages in that time. The active core bond ETF beat those returns of 4.05% and 3.37%, respectively.
It’s that active management that can help it stand out, even as the bond landscape continues to shift. While it may not make sense as one’s only core allocation, as a core-plus ETF it can appeal. Looking ahead, the fund’s seeking of upside in the bond landscape, too, can potentially help overall portfolio performance amid general uncertainty. It is also on track to hit its third ETF anniversary in a little more than a year, potentially setting it up for a strong next 12 months.
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