Active Bond ETFs in a Changing Market Environment

Income investors have enjoyed a three-decade long bull run but the good times won’t last forever. In a shifting environment, one may turn to actively managed bond ETFs backed by a seasoned team to adapt to market conditions.

For example, the actively managed Fidelity Total Bond ETF (NYSEArca: FBND), Fidelity Limited Term Bond ETF (NYSEArca: FLTB) and the Fidelity Corporate Bond ETF (NYSEArca: FCOR) can help investors access tested fixed-income strategies to maintain quality and yield.

The active ETFs “leverage an experienced investment team to bring strategies to market,” Lee Sterne, an ETF strategist at Fidelity, told ETF Trends in a call. “The strategies are managed by an investment team that manage mutual funds, institutional mandates as well as ETFs.”

While many may be concerned about the timing of the Federal Reserve’s monetary policy with some expecting changes to interest rates as soon as next month, Fidelity’s fixed income team takes a step back and looks at the bigger picture.

“I view fixed income as a strategic allocation that everyone should consider owning as part of their overall investment strategy,” Sterne said.

At Fidelity, the team emphasizes yield opportunities but focus on those quality debt exposures. While the active bond ETFs may include more high-yield corporate debt and lean toward higher risk credit, the active managers pick the best issuers and implement quality screens to pick out the best mix between yield and risk. For instance, FBND includes 31.2% corporate credit and of which 11.55% is high-yield debt and shows a 2.40 30-day SEC yield.