An Active Short-Term Bond ETF for Changing Times Ahead

As fixed-income investors position for a rising rate environment ahead, one may consider an actively managed short-duration bond ETF to limit rate risk and capitalize on seasoned expertise to navigate changing conditions.

For instance, the actively managed Natixis Loomis Sayles Short Duration Income ETF (NYSEArca: LSST) will try to outperform the Bloomberg Barclays US Government/Credit 1-3 Year Index by finding potential sources of alpha or outperformance through sector allocation, security selection and duration management or yield-curve positioning.

The fund focuses on short-term corporate credit as the short-duration credit may provide higher yield than Treasury bonds of similar duration. The ETF shows a 2.10% 30-day SEC yield.

LSST can provide “higher yield potential than with money markets and ultra-short duration securities,” according to Natixis. “Short duration fixed income securities may provide better income potential than money market and ultra-short duration funds. Also, we believe they are less affected by rising interest rates than longer duration fixed income securities.”

The active management team is also able to freely adapt to changing market conditions that may negatively impact the underlying portfolio, notably a rising rate environment. The fund follows a sector allocation strategy utilized by Loomis’ Global Asset Allocation Team to provide views on global interest rates, inflation, economic activity and asset class performance under various economic conditions. The team seeks to identify where investment value may lie in various markets and focus on the most attractive securities in each sector.