Is it time to dig into fixed income? For the Fed to reach its 2% inflation goal from its rate of 7.7% YOY as of the end of October, it may take a “new normal” of higher rates, even if the Fed does aim for a soft landing. That may increase the appeal of certain fixed income offerings, and with investors on the hunt, a multisector income ETF like the American Century Multisector Income ETF (MUSI) might be the right fit given its flexibility and active management.
From municipal bonds to short-term investment grade corporate bonds, several different types of fixed income can offer attractive yields given how high treasury yields are sitting. Certain types of mortgage-related products are also finding their moment has come thanks to the drop off they’ve taken amid a slump in housing prices.
There’s reason to be concerned that equities could face some serious damage early next year as well and struggle to recover as banks continue to keep rates tighter. That adds to the argument for income to supplement investors’ portfolios, buoying equities until markets have a bit more clarity.
That presents an opportunity for an opportunity-seeking strategy like MUSI, which actively invests across the fixed income spectrum. MUSI charges 35 basis points to pursue current income and total return, investing in high yield, bank loans, securitized and emerging market debt securities, and preferred stock or convertible securities, among other holdings.
The multisector income ETF uses a sector rotation approach that values both fundamental and quantitative inputs, while also using derivatives to generate income or hedge exposures. MUSI has taken in $14.7 million in net inflows over the last month, with returns picking up as well. The ETF returned 2% over one month compared to -1% over the last three months.
Since launching in June of 2021, MUSI has reached $126 million in AUM. The multisector income ETF may be the right play for those investors who are looking for income and flexibility in their exposures, especially with so much uncertainty looming in the weeks and months ahead.