Tariffs continue to confound investors, including those in the fixed income market. Because that’s where the need to diversify becomes more imperative. Furthermore, incorporating an active strategy can help ease volatility amid a sea of market uncertainty.
“As the agenda unfolds and the market waits for more clarity on U.S. tariff policies and responses from global governments, bond investors should prioritize the active selection of both sectors and individual securities, as fiscal policies are likely to further increase fundamental dispersion (the spread of returns among fixed-income assets) as well as volatility in interest rates and spreads (the difference in yields between bonds),” noted Morgan Stanley in a fixed income outlook.
On that note, there are two funds from Neuberger Berman that prioritize active selection. The first to consider is a multi-income approach: the Neuberger Berman Flexible Credit Income ETF (NBFC).
In addition to bonds, this ETF uses a multi-income approach. It may also invest in derivatives such as futures, swaps, forwards, and options. NBFC doesn’t seek to maintain a specific average duration with its holdings. It skews toward intermediate. The weighted average duration is 5.85 years. The weighted average maturity is 7.77 years (both as of March 31).
NBFC’s diversification is readily apparent, with its 350-plus holdings (as of May 8). If investors are seeking yield, this ETF isn’t lacking in that department. It has a 7.10% 30-day SEC yield (as of April 30). NGBF is able to explore markets for yield opportunities using its experienced portfolio managers via its active strategy.
As mentioned, an active strategy like the one inherent in NBCF can be beneficial in times of heavy market volatility, like the month of April. The Cboe Volatility Index (VIX) spiked more than 200% during the first week of April. That provies it’s best to stay agile in a volatile market. Fixed income markets aren’t immune to volatile times, making NBFC useful in the current environment.
Sticking With Bonds
Rather than incorporate a multi-income strategy approach, some investors may want to stay within the confines of bonds. Like NBFC, they can opt for an active strategy that strictly focuses on core bonds using the Neuberger Berman Total Return Bond ETF (NBTR). Unlike a passive core bond fund, this fund’s active management strategy can adapt to changing market conditions. That allows for the adjustment of holdings when deemed necessary.
NBTR is heavily diversified, adding more than 400 holdings (as of May 8) that includes both government and corporate bonds. Having that mix of quality and yield gives investors a healthy balance of adding investment-grade debt issues while still maximizing income. Adding to the income diversification is a mix of mortgage- and asset-backed securities. As of April 30, its 30-day SEC yield is 5.41%.
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