As money managers consider expanding into actively managed ETFs, investors will be able to access more time-tested strategies to potentially better navigate market shifts.
“This is the next evolution, the next chapter, really, in ETF investments is how you get active strategies in equity form. There have been active strategies to-date with fixed-income – very successful, but now we’re able to bring as an industry to our clients and our shareholder’s active equity for ETFs,” Greg Friedman, Head of ETF Management and Strategy, Fidelity, said at the Inside ETFs conference.
For now, Fidelity offers a line of actively managed bond ETFs based on years of money management from their mutual fund business.
For example, the actively managed Fidelity Total Bond ETF (NYSEArca: FBND): seeks a high level of current income. It uses the Bloomberg Barclays U.S. Universal Bond Index as a guide in allocating assets across the investment-grade, high yield, and emerging market asset classes. The fund invests up to 20% of assets in lower-quality debt securities. It is managed to have similar overall interest rate risk to the index.
The Fidelity Limited Term Bond ETF (NYSEArca: FLTB) may help investors shift down the yield curve to short-term debt. The ETF invests in investment-grade corporate bonds and other corporate debt securities and repurchase agreements for those securities. The bond fund’s managers will try to achieve a similar overall interest rate risk to the Bloomberg Barclays U.S. Credit Bond Index.
The Fidelity High Yield Factor ETF (NYSEArca: FDHY) seeks to provide a high level of income and may also find capital appreciation by investing in debt securities rated below investment grade. The fund uses a proprietary multi-factor quantitative model to screen over 1,000 debt securities and chooses those with strong return potential and low probability of default through a value and quality factor-based methodology. The fund uses the ICE BofAML BB-B US High Yield Constrained Index to guide the selection process of its investments as it relates to credit quality distribution and risk characteristics.
Additionally, the Fidelity Corporate Bond ETF (NYSEArca: FCOR) invests in investment-grade corporate bonds and other corporate debt securities and repurchase agreements for those securities. The ETF uses the Bloomberg Barclays U.S. Credit Bond Index to guide its selection process.
Watch Greg Friedman Discuss The Expanse of Actively-Managed ETFs:
For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category