Active Bond ETFs: What's Inside?

In the three-year period ended 2022, 48% of actively managed investment-grade intermediate fixed income mutual funds outperformed the Bloomberg US Aggregate Bond Index, per the SPIVA Scorecard. This contrasts with just 26% of active U.S. large-cap equity mutual funds outperforming the S&P 500 Index.  

Many advisors and end clients have been rewarded for turning to active management to support fixed income exposure. Mutual funds have historically been the best way to gain access to experienced fixed income managers. However, many asset managers have also brought their best and brightest into the ETF industry with fixed income ETFs. Some of them will be represented at the VettaFi Fixed Income Symposium on July 24.

See related: Todd Rosenbluth on the Fixed Income Symposium 

Actively Managed Bond ETFs to Protect Against Rising Rates 

One of the newer, yet popular active bond strategies is the Capital Group Short Duration Income ETF (CGSD). CGSD launched in October 2022 but has $260 million in assets. The fund recently had 48% in corporate bonds, 30% in mortgage-backed securities, and 20% in asset-backed securities. But unlike the intermediate-term ETFs listed below, CGSD had an effective duration of 2.2 years. Such moderate duration will help protect against future rate hikes. 

See more: “ETF 360: Vince Golzales on Capital Group’s CGSD” 

Anmol Sinha, a fixed income investment director at Capital Group, will be speaking with me about the growing popularity of active ETFs at 12:45 PM ET at the Fixed Income Symposium. Steve Laipply, managing director at BlackRock, will join Sinha for the active management discussion.  

BlackRock is the largest fixed income provider in the U.S. with a host of index-based ETFs. The firm also offers some popular active ETFs. For example, the BlackRock Ultra Short-Term Bond ETF (ICSH) has $6.1 billion in assets and has an effective duration of 0.4 years. The fund invests in commercial paper, CDs, and investment-grade floating-rate bonds. ICSH is a strong alternative to sitting in a money market fund.  

BlackRock also expanded its active ETF lineup in late May with a multi-sector bond ETF, the BlackRock Flexible Income ETF (BINC). 

Active Bond ETFs With Flexibility to Find Reward Opportunities Anywhere 

Multi-sector bond ETFs will be featured in a different session at the Fixed Income Symposium due to the wide array of exciting ETFs. One of those active bond ETFs, the American Century Multisector Income ETF (MUSI), launched in mid-2021 and manages $155 million in assets. The ETF balances interest rate and credit risk in a portfolio that spans investment-grade, high yield, securitized and emerging markets debt securities. The managers have the flexibility to adjust sector and credit quality as opportunities emerge to help enhance yield and reduce risk.  

See more: Todd Rosenbluth interviews American Century at NYSE 

At the end of June, 27% of MUSI assets were in U.S. government bonds, 20% in investment-grade corporates, and 16% in high yield corporates. The remainder was split between asset-backed and mortgage-backed securities as well as collateralized loan obligations. Co-manager Jason Greenblath will speak with me at the event on July 24 at 1:30 PM ET during a multi-sector bond investing session. 

Fidelity and PIMCO Also Speaking at the Fixed Income Symposium 

Celso Munoz, who is the co-lead portfolio manager for the Fidelity Total Bond ETF (FBND), will be joining Greenblath and I at this multi-sector bond investing session. FBND is one the largest active core-plus bond ETFs, with $4.3 billion in assets. The fund recently had 37% of assets in corporate bonds, 32% in government bonds, and 25% in securitized investments. Like MUSI, FBND can and does own high yield bonds. I’m excited to hear from these managers about where they see reward opportunities in the second half of the year. 

In addition to these sessions, advisors are going to hear from David Braun, portfolio manager of the PIMCO Active Bond ETF (BOND), a $3.5 billion fund. Braun will help kick off the fixed income event at 11:00 AM ET. He will share the stage with VettaFi’s Tom Lydon and Bloomberg Intelligence’s Eric Balchunas. They will speak about the macroeconomy and the fixed income ETF landscape. This discussion will set the stage for the rest of the symposium. 

There’s still time to register and receive up to three continuing education credits. Come and hear from some of the best in the ETF business about how to position toward fixed income for the second half of 2023. 

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