Last month saw the Federal Reserve cut interest rates for the second time, with capital markets prognosticating on just how aggressive the central bank will be in 2026. This uncertainty could cause investors to wonder how to extract income in this rate-cutting cycle. The answer could be left to the experts using an actively managed ETF: the Fidelity Tactical Bond ETF (FTBD).
While the goal of FTBD is practical — to seek a high level of income — its methodology is tactical. The fund positions investors in a way where they can maximize income opportunities that a passive fund simply can’t offer. Because it’s benchmarked to the Bloomberg U.S. Aggregate Bond Index, the fund also seeks to deliver consistent returns on a risk-adjusted basis. The ETF is ideal for investors not only seeking income, but for those looking to diversify their fixed income exposure.
When it comes to bond exposure, active management is paramount. The bond market is not only vast, its fragmentation into various subcategories make it a complex space to approach. As such, FTBD taps into the knowledge and expertise of its portfolio managers who know how to approach the nuanced bond market. The bond market certainly carries its own unique set of idiosyncrasies that only those familiar with the various subcategories of bonds can navigate.
A Diversified Income Pool
FTBD’s portfolio managers have a plethora of opportunities to consider to maximize income. The diversified pool of income opportunities include investment-grade, high yield and emerging markets debt securities with varying maturities.
As noted on the fund’s product page, holdings will typically include U.S. government securities, investment-grade corporate debt, below-investment-grade debt securities, investment-grade securitized debt securities, floating-rate loans and other floating-rate securities, inflation-protected debt securities, hybrid and preferred securities, contingent convertible securities, and securities of foreign issuers (as mentioned, emerging markets included). Needless to say, the income opportunities are vast, and FTBD will consider the full spectrum for exposure.
As of October 31, the fund is skewed toward government debt (just over a 50% allocation) and corporate debt (40%). The latter has been showing signs of stronger fundamentals, offering a mix of yield while mitigating credit risk. Because FTBD can focus on opportunities outside of the U.S., the diversification translates to fixed income exposure in Europe (7.55% allocation) as well as Latin America (6.26%).
With an expense ratio of 55 basis points, the 30-day SEC yield is 4.72% (as of November 6).
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Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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