Active ETFs to Help Fixed-Income Investors Navigate Rising Rates

After the three-decade long bull run in the fixed-income market, investors may be looking to actively managed bond ETFs that can better navigate the potential changes ahead.

“I think the timing for active is a great opportunity. Basically, late in the cycle, you’re going to have winners and losers, so now is exactly the time when you want that expertise, that credit research, demonstrated investment process,” Paul Kim, Managing Director of ETF Strategy at Principal Global Investors, said at the 2018 Morningstar Investment Conference.

For example, the Principal EDGE Active Income ETF (NYSEArca: YLD) is an actively managed multi-asset fund. Multi-asset exchange traded funds have provided diversified exposure to a group of various asset classes and generated attractive yields and have become income investor favorites as advisors and investors searched for new yield sources amid several years of rock-bottom U.S. interest rates.

YLD seeks to generate consistent income through changing market environments and over market cycles. It invests opportunistically across a diversified range of income-generating asset classes while managing for risk. EDGE’s proven investment process, long history of income investing, and strong risk management and credit research capabilities may help enhance returns while reducing risks.

“Think of it as a better high-yield alternative,” Kim said.