The capital markets expect the U.S. Federal Reserve to eventually pivot from its tight monetary policy options. Therefore, fixed income investors should take advantage of yield while it’s available. Thankfully, actively managed exchange-traded fund (ETF) options are out there. Three active ETF options from American Century can offer various avenues for yield.
With active management, portfolio holdings can be adjusted as market conditions change. As such, exposure to higher yielding assets can be made on the fly if and when a low-rate environment returns.
Getting yield overseas via emerging markets (EM) can offer investors attractive options, and this can be made easier via one ETF: the American Century Emerging Markets Bond ETF (AEMB). The fund uses active management to deliver high levels of income and attractive risk-adjusted returns over a full market cycle with a low 0.39% expense ratio.
In terms of holdings (over 140 of them), investors will see a mix of debt in corporate, sovereign, and quasi-sovereign. This gives AEMB a dose of diversification while maximizing yield at the same time. That’s a top-of-mind subject, especially if rate hikes start to fall and yields follow suit.
As of July 31, AEMB features a 30-day unsubsidized yield of about 7.29%, while its 12-month distribution rate, again as of July 31, is 5.73%. In terms of duration (option-adjusted), it falls within the intermediate range of 7.32 years.
2 More Active Options
With a 30-day unsubsidized yield of 7.23%, another active option is the American Century Select High Yield (AHYB). As mentioned, the active management component allows the fund managers to remain pliable in a market environment that can change rapidly, especially with the Fed still trying to tame inflation.
According to the fund’s product website, the managers apply a research-intensive process that seeks to identify companies they believe can carry debt loads across various market cycles, generate sustainable cash flows, and decrease leverage on their balance sheets in pursuit of higher ratings. The fund is highly diversified, with 471 holdings as of June 30, reducing risk by minimizing concentration.
Another active ETF that draws on various income sources is the American Century Multisector Floating Income ETF (FUSI). The fund has a 30-day unsubsidized yield of 6.22%, which should appease income seekers.
Per FUSI’s fund description, it seeks to complement an investor’s core bond holdings with current income, broad diversification, and the potential to mitigate the impact of rising rates. Its fund draws income from U.S. government debt, mortgage-backed securities, and collateralized loan obligations.
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