The Federal Reserve disappointed many market participants when it didn’t lower interest rates last month and President Trump recently named a successor to Jerome Powell. Suffice to say, there’s a lot going on at the central bank. Indeed, there may be more headline risk in the bond market than investors are comfortable with. However, avenues to survive and thrive during potentially tumultuous times exist. Those including putting active management to work. Enter the ALPS/SMITH Core Plus Bond ETF (SMTH), one of the fastest-growing ETFs in the active fixed income category.
The $2.45 billion SMTH turned two years old in December. It’s clear the ETF came to market at the right time; adoption of bond ETFs, including the actively managed variety, is on the rise.
“The number of bond ETFs available to investors has steadily increased since 2019,” noted Morningstar’s Daniel Sotiroff. “And a lot of investors are taking interest in them. Almost $430 billion flowed into bond ETFs in 2025, or about 30% of all ETF inflows for the year. Bond ETFs are a big component of the ETF ecosystem, and there are no signs of that trend slowing down.”
SMTH in the Right Place at the Right Time
Undoubtedly, SMTH is a success story. Understanding that success boils down to a few key factors, including advisors’ increasing demand for better bond mousetraps.
“One reason is that stock ETFs are heavily picked over,” added Sotiroff. “Just about every stock strategy has been attempted at this point: broad market indexes, strategic-beta/risk factors, sustainability and values-based strategies, and thematic ETFs, along with active and passive approaches to many of them. The best stuff is already out there, it’s fairly inexpensive, and it’s difficult to compete with.”
It’s hard for even the most inventive issuers to develop captivating equity ETF ideas, but there’s ample room for innovation in the fixed income space. SMTH is arguably innovative because, while it’s not an “exotic” bond fund, it does things a little bit differently than standard passive aggregate bond ETFs — and those differences may work in long-term investors’ favor. On that note, it’s worth examining some of the advantages offered by ETFs like SMTH relative to passively managed rivals.
“In some instances, active managers can invest in bonds that are off-limits to the indexes tracked by the three ETFs mentioned here because they’re too small or too complicated to fit neatly into an index’s rules. For those reasons, active managers have some levers to pull to improve upon a broad market, index-tracking ETF,” concluded Sotiroff.
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