Make Use of Active Fixed Income ETFs to Harvest Tax Losses

Break out the peppermint mochas and eggnog, it’s tax loss harvesting season. With 2022 being a pretty rough year for bonds, active fixed income ETFs could be a good place to transition assets while harvesting losses.

Reinvesting in ETFs can offer an additional level of tax efficiency to taxable portfolios undergoing this year-end strategy. And while investors’ options for active fixed income ETFs funds have been limited, that’s changing. ETF issuers are launching more actively managed funds as more investors accept the benefits of the ETF wrapper.

While passive strategies lack the flexibility to adapt to changing market environments, active ETFs can offer the potential to outperform benchmarks and indexes. Plus, active managers with greater resources and greater scope benefit from economies of scale, which can often translate to better returns.

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), the T. Rowe Price Ultra Short-Term Bond ETF (TBUX), and the recently launched T. Rowe Price U.S. High Yield ETF (THYF).

“Actively managed fixed income ETFs are able to sort through the bond universe to find securities with relatively strong risk and reward attributes for the current environment,” said Todd Rosenbluth, head of research at VettaFi. “As bond yields have climbed higher in 2022, there are securities that are mispriced and available for the skilled manager.”

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.

“Active fixed-income ETFs can serve as meaningful building blocks that sit in the core of an investor’s portfolio and help investments weather volatility through income generation, capital preservation, and inflation protection,” Framsted added.

For more news, information, and strategy, visit the Active ETF Channel.