The Federal Reserve has implemented an aggressive monetary policy tightening regime, throwing what should have been a safe-haven fixed income market into turmoil. As we re-adjust to this new rising rate environment, many investors will have to consider alternative strategies beyond the traditional core portfolio mix to adapt to the ongoing challenges.
In the upcoming webcast, Active Fixed-Income Answers to Tight Monetary Policy, Andrew McCormick, head of fixed income at T. Rowe Price, and Timothy Coyne, head of exchange traded funds at T. Rowe Price, will review the current bond market trends, explain how active management may be better suited in a more volatile environment, and outline strategies that can help financial advisors diversify their client portfolios for the conditions ahead.
T. Rowe Price offers an actively managed bond ETF suite, including the T. Rowe Price Total Return ETF (TOTR), the T. Rowe Price Ultra Short-Term Bond ETF (TBUX), the T. Rowe Price QM U.S. Bond ETF (TAGG), the T. Rowe Price U.S. High Yield ETF (NYSE Arca: THYF), and the T. Rowe Price Floating Rate ETF (NYSE Arca: TFLR).
TAGG seeks to provide a total return that exceeds the performance of the U.S. investment-grade bond market. It uses its modest tracking error budget to seek to outperform the Bloomberg U.S. Aggregate Bond Index on a net-of-fee basis. The fund is managed by Robert Larkins, who has 18 years of investment experience, all at T. Rowe Price.
TOTR seeks to maximize total return through income and, secondarily, capital appreciation. It combines all-weather portfolio construction techniques with tactical market insights to generate income and attractive risk-adjusted returns across market cycles. The fund is co-managed by Chris Brown, who has 21 years of investment experience, 16 of which have been at T. Rowe Price, and Anna Dreyer, who has 12 years of investment experience, all at T. Rowe Price.
TBUX seeks a high income level consistent with low principal value volatility. It intends to provide a high level of income while minimizing principal volatility by using a broadly diversified portfolio composed of shorter-term government, investment-grade corporate, and securitized bonds. The fund is managed by Alex Obaza, who has 16 years of investment experience, 13 of which have been at T. Rowe Price.
THYF is designed to primarily provide a concentrated yet balanced portfolio focused on the traditional U.S. high-yield bond investment opportunity set. THYF seeks to provide total return and, secondarily, current income by investing primarily in U.S. dollar-denominated high-yield corporate bonds and other fixed and floating-rate corporate securities. The fund is led by Kevin Loome and uses the same process as the mutual fund T. Rowe Price U.S. High Yield Fund (TUHYX).
TFLR seeks high current income and, secondly, capital appreciation by investing primarily in BB- and B-rated loans, which the fund’s portfolio manager believes are likely to keep volatility at below-market rates over time. It is broadly diversified across 200–300 issuers. The ETF’s strategy is constructed similarly to the mutual fund, the T. Rowe Price Floating Rate Fund (PRFRX), investing primarily in floating-rate loans and other floating-rate debt securities. The strategy uses a disciplined approach to credit selection, featuring research and risk control. Paul Massaro, head of the global high-yield team and portfolio manager of the floating-rate strategy, manages the fund.
The firm’s lineup of active ETFs complements its traditional mutual fund offerings and delivers key features typically associated with ETFs that some investors may prefer, including continuous daily trading, real-time market-determined pricing, and tax efficiency.
Financial advisors who are interested in learning more about the fixed-income market can register for Friday, December 9 webcast here.