ETF 360: Strive's Matt Cole on Active Fixed Income

On the latest episode of “ETF 360,” VettaFi head of research Todd Rosenbluth interviewed Strive’s Matt Cole about actively managed fixed income.

Strive is known for claiming BlackRock is “too woke.” Sidestepping politics to speak to fixed income, Cole said, “When it comes to fixed income, active makes sense for most investors.” He noted that several structural reasons make it advantageous for active bond portfolio managers.

Why Fixed Income, Why ETFs?

Going into why now is a good moment for Fixed Income investors, Cole said “just speaking at a high level, yields are up.” He also pointed out that for the past 15 years, there has not been yield in fixed income. “Right now you have treasury yields across the curve around 5%.” The Strive Total Return Bond ETF (STXT) is getting a yield of over 6%, according to Cole. “That is a pretty attractive yield for most investors.”

Cole also sees several advantages in choosing an ETF over a mutual fund. Liquidity is a big advantage, but also the ability to see the holdings of what you own daily. “Many mutual funds don’t offer that,” Cole observed.

The Best Opportunities in This Environment

Asked about the best opportunities in this current environment, Cole said, “I don’t view duration risk as an extremely attractive risk to take in a total return bond fund.”

Looking at credit risk, Cole shared that though you are getting paid to take credit risk, you aren’t getting paid a ton. He sees a recession coming on the horizon. “We’re close to the end of the business cycle than the beginning.”

Pivoting to liquidity risk, he said “We will typically not be taking a lot of liquidity in our Strive bond fund.” Convexity risk is what Cole sees as the “most attractive” risk. Agency mortgages in particular are where Cole sees the most opportunity. “We see the refinances of the agency mortgages remaining very low, which means we will actually be able to earn that spread pick up while taking very little credit risk in our fund.”

To watch past episodes of ETF 360, visit the ETF 360 Channel