Dive Deep Into Active Diversification With This Multi-Income ETF

The current market environment continues to throw curve balls when it comes to obtaining yield. That said, a multi-income approach could translate to hits via the American Century Multisector Income ETF (MUSI).

Where exactly are fixed income investors headed? One Barron’s article noted that family offices are leaning towards high quality and short duration.

“Family offices, which manage the fortunes of many of the world’s super-rich, are increasing their allocations to high-quality, short-duration fixed income,” the article said. “This is just one of several portfolio shifts they’re making in response to changing market conditions and worries about geopolitics and inflation, according to a new report by wealth manager UBS.”

Per its fund description, MUSI pursues attractive income and total return by balancing interest rate and credit risk in a portfolio that spans investment-grade, high yield, securitized and emerging markets debt securities. With its active management strategy, portfolio managers have the flexibility to adjust sector and credit quality as opportunities emerge to help enhance yield and reduce risk.

Having that flexibility is a must in current times. Raise rates, lower rates, or pause — MUSI gives investors an income strategy that can change with the times.

Multi-Income Exposure

The “multi-sector” exposure eponymously speaks for itself with respect to the fund’s name. In total, the fund is comprised of 314 holdings to add a deep level of income diversification.

Given the fund’s active management strategy, holdings are hand-picked to suit the current market environment. In this case, of course, it’s a rising rate environment, so obtaining maximum yield is ideal.

With regard to yield, the numbers speak for themselves. As of April 28, the 30-day unsubsidized SEC yield is 5.5% and the 12-month distribution rate is 4.5%.

With quality in mind, MUSI skews heavily towards safer debt. In this case, U.S. government bonds receive 27% of the fund’s allocation (as of April 30).

Balancing that safe haven U.S. government debt is the need for yield, which helps the fund attain that 5.5% 30-day SEC yield number. In this case, 18% goes towards high yield corporate, while 17% rests with investment-grade corporate debt (both allocations also as of April 30). This is also an indication of the fund’s focus on balancing credit risk and obtaining yield to mitigate rate risk.

Given its deep level level of diversification and active management strategy, the fund comes at a relative bargain. MUSI features a low expense ratio of just 0.36%.

For more news, information, and strategy, visit the Core Strategies Channel.