Fixed income markets have been through a massively turbulent period so far this year. The Bloomberg Global Aggregate and Bloomberg U.S. Treasury indexes have both hit historical lows. As investors are selling off high-risk assets, they’re also questioning the role of fixed income in their portfolios. Active managed funds can help.
While things seem dire for fixed income, investors can’t just ignore the bond market. Not only is it the world’s largest securities market by a wide margin, but it has also experienced meteoric growth, both in terms of size and number of issuers. Citing data from Bloomberg and JPMorgan, a white paper from Capital Group shows that the global Treasuries market reached $36.144 trillion as of year-end 2021, up nearly sixfold from the market’s $6.4 trillion value 20 years prior.
“In moments of uncertainty, it is important to stop and reflect on the basic role of fixed income in a portfolio,” the paper said. “While the primary objective of investing in equity is capital growth, fixed income helps serve four key roles: capital preservation, income generation, inflation protection and diversification from equities.”
So, with continued volatility, quantitative tightening, and sustained geopolitical risk, bond investors may want to consider an active approach to investing. While passive strategies often lack the flexibility to adapt to changing market environments, active bond ETFs can offer the potential to outperform fixed income benchmarks and indexes.
“Navigating the bond market is even more challenging for advisors this year as bonds fall in value,” said Todd Rosenbluth, head of research at VettaFi. “However, the ability to tap into the expertise of experienced managers along with the liquidity benefits of an ETF has been compelling.”
As part of its lineup of active exchange traded funds, T. Rowe Price offers a suite of actively managed fixed income ETFs, including the T. Rowe Price QM U.S. Bond ETF (TAGG), the T. Rowe Price Total Return ETF (TOTR), and the T. Rowe Price Ultra Short-Term Bond ETF (TBUX).
T. Rowe Price has been in the investing business for over 80 years, conducting field research firsthand with companies, utilizing risk management, and employing a team of experienced portfolio managers carrying an average of 22 years of experience.
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