Income ETFs have exploded in popularity in recent years. Their ability to add current income to portfolios as costs rise, or to meet particular client goals like transitioning to retirement, has made them one of the most exciting segments in ETFs. Active management can add a powerful wrinkle therein, bringing flexibility to their approaches, a powerful advantage as U.S. Iran volatility continues to impact portfolios.
The T. Rowe Price Multi-Sector Income ETF (TMSF)
The T. Rowe Price Multi-Sector Income ETF offers exposure to the full fixed income landscape in its quest to provide investors with current income – as well as some capital appreciation. TMSF charges a 37 basis point (bps) fee for its approach, actively investing in sectors like U.S. and foreign high yield, investment-grade corporates, asset-backed securities, and emerging market debt.
Using its active flexibility, it can invest across all maturities and move between allocation levels as needed. It also uses derivatives for various goals like managing rate or credit risk and hedging. That active management can help in a complicated landscape for both monetary policy and geopolitics. TMSF has provided a 30-day SEC standardized waivered yield of 5.52% as of February 28th, per T. Rowe Price data.
The T. Rowe Price Intermediate Municipal Income ETF (TAXE)
Turning from TMSF’s broad, flexible remit across categories, investors can also consider a fund like TAXE. TAXE, the T. Rowe Price Intermediate Municipal Income ETF, leans on U.S. municipal bonds to pursue a high level of tax-exempt income. It charges 24 bps fee.
Unlike index-based strategies, the active fund can assess issuers closely and analyze each bond for credit quality. The portfolio managers also measure metrics like interest rates as well as prices and yields to help construct a picture of economic conditions. The strategy provided a 30-day SEC standardized yield with waiver of 3.02% as of February 28th according to T. Rowe Price.
The T. Rowe Price Capital Appreciation Premium Income ETF (TCAL)
Finally, rounding out the trio, the T. Rowe Price Capital Appreciation Income ETF (TCAL) takes an equity call option approach to income. Call option income ETFs have become one of the most popular segments of income ETFs in recent years. TCAL takes an active approach to doing so, combining a risk-aware conservative equity portfolio with that income.
Specifically, it aims to offer regular distributions via dividends and options premiums. It applies a bottom-up approach to find firms with strong potential for returns, adjusted for risk, while also picking up that income. Its active approach helps it assess each issuer closely while also adapting as events require. TCAL has provided 2.5% over the last three months per ETF Database data, with a 9.14% distribution rate as of February 28th.
Together, with active ETFs and income ETFs on the rise, looking to funds combining both can appeal. TCAL, TAXE, and TMSF each can play a strong role for a turbulent global market.
For more news, information, and strategy, visit the Active ETF Content Hub.
