Investors have had a renewed appetite for bonds so far this year, with bond funds seeing improved inflows after last year’s inflation-racked market. While there are a number of ways to get bond exposure, consider active exchange traded fund (ETF) options.
The inflows thus far are a stark contrast from last year. Rising interest rates soured the taste for bonds, while likewise, a risk-off sentiment saw investors also exit from the stock market.
“U.S. bond funds saw $32 billion of inflows on the year through Feb. 8, a huge shift from their $18 billion of outflows over the same stretch of last year, according to Barclays data,” a MarketWatch report noted.
“Similar strength in bond flows has been evident in exchange-traded funds, according to Matthew Bartolini, head of SPDR Americas Research, who pointed to seasonality tied to year-end tax implications that favor fixed-income over equities as likely playing a role,” the report added.
2 Active Options for Bond Exposure
Active management can give investors dynamic exposure to the vast universe of bond options. Rather than selecting holdings themselves to build a bond portfolio, active management does all the heavy lifting for them.
One fund to consider is the T. Rowe Price QM U.S. Bond ETF (TAGG). TAGG seeks to outperform the Bloomberg U.S. Aggregate Bond Index, which is broadly diversified, containing a mix of investment-grade, fixed income instruments that have varying maturity dates — in essence, it gives investors broad-based exposure to the bond market, making it an ideal option if investors don’t know where to start when it comes to adding bonds to a portfolio.
For the more discerning bond investor who is seeking fixed income options, there’s the T. Rowe Price Total Return ETF (TOTR). The fund seeks to offer maximum returns for investors primarily through income, as well as capital appreciation by investing in a diverse set of bonds and debt instruments.
TOTR is constructed to be flexible in changing market conditions while still seeking strong returns. The fund primarily invests in U.S. intermediate-term bonds but has the freedom to purchase bonds from across the global opportunity set and maturity spectrum.
Examples might include debt securities issued by the U.S. government and its agencies, corporate bonds, bank loans, and various types of mortgage-backed and asset-backed securities. TOTR is ideal for the investor looking for total returns via price appreciation as well as income.
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