Look to Active Bond ETFs to Navigate a Shifting Fixed-Income Environment

The fixed-income market has experienced a multi-decade bull run but the streak is expected to end as the Federal Reserve looks to tighten its monetary. Consequently, bond ETF investors should begin to take a closer look at their portfolios.

“Expected returns are going to be a little bit lower, we believe. If you look at yields across all the fixed-income segments – lower than average, you look at valuations across equity markets – higher than average, again, what we believe that leads to is slightly lower returns,” Lance Humphrey, Portfolio Manager at USAA, said at the 2018 Morningstar Investment Conference.

To better navigate a tougher market condition ahead, bond investors may look to actively managed ETFs with a seasoned team behind the strategy. For instance, USAA offers the USAA Core Short-Term Bond ETF (NYSEArca: USTB) and USAA Core Intermediate-Term Bond ETF (NYSEArca: UITB) to help investors access the fixed-income markets.

“When we look at the core portions of our fixed-income portfolios, we do believe that a skilled experience – active management team – can really add value over those broad indices, like the Barclays Aggregate,” Humphrey added.

The actively managed fixed income ETFs incorporate USAA’s decades of experience in Core Bond categories, with the USAA Core Intermediate-Term Bond ETF focusing on high current income without undue risk to principal and the USAA Core Short-Term Bond ETF targeting high current income consistent with preservation of capital.

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