Displaying items by tag: active etfs

Wednesday, 10 July 2024 05:19

Rate Cuts Coming Switch To Active Funds

The conversation about rate cuts is heating up again as we move into 2024. Signals from the Fed hint at potential rate reductions, spurred by weaker job numbers and rising unemployment. With a lackluster June jobs report and unemployment up to 4.1%, a September rate cut looks increasingly likely. 

 

For investors, active ETFs offer a strategic response, providing flexibility and potential advantages over passive index funds. These ETFs can adapt to market shifts, benefiting from lower borrowing costs for smaller growth companies. 

 

As the market concentrates on a few mega-cap firms, active ETFs can diversify risk and capitalize on emerging opportunities. In light of these dynamics, active strategies present a potent option for investors adjusting to the evolving economic landscape.


Finsum: Active management could prove fruitful if interest rates fall and they can capitalize on, say, growth opportunities like tech. 

Published in Wealth Management
Thursday, 04 July 2024 13:52

Hidden Benefits of Active Fixed Income

When considering fixed income ETFs, active strategies offer notable advantages over passive ones. Unlike equity indexes, replicating a bond index like the U.S. Agg is "impossible" due to smaller bond quantities, infrequent trades, and varying maturities and credit ratings.

 

 Active management allows flexibility to adapt to shifting bond markets and interest rate environments. The T. Rowe Price QM U.S. Bond ETF (TAGG), for example, charges eight basis points and seeks to outperform the U.S. Agg through a diverse range of investment-grade U.S. bonds.

 

 As fixed income ETFs grow in popularity, active strategies present a valuable alternative. This trend reflects a broader move towards active management within the ETF space.


Finsum: When thinking about the advantages of active bonds its important to consider this index replicability that you can’t get in fixed income. 

Published in Wealth Management
Thursday, 04 July 2024 05:55

Active ETFs Dominating Interest Rate Market

Active ETFs have surged in popularity, dominating new launches, inflows, and headlines in the ETF market. At the 2024 Morningstar Investment Conference, industry experts discussed how active ETFs are reshaping the investment landscape.

 

Nicole Hunter from Dimensional Fund Advisors highlighted DFA’s aggressive entry into active ETFs, converting $30 billion from mutual funds and now holding over $140 billion in assets across 38 active ETFs. T. Rowe Price noted that although active ETFs account for only 5% of ETF assets, they represent 70% of recent launches.

 

 Despite their growth, active ETFs also face a high closure rate, with over 100 shutting down last year. The panelists discussed the benefits of ETFs, including tax efficiency and transparency, while also acknowledging that traditional mutual funds still have their place in the market.


Finsum: Some volatility is hard to read but both geopolitical and interest rates are relatively easy to capitalize on for active funds. 

Published in Bonds: Total Market
Friday, 28 June 2024 03:21

Cost No Concern for This Active Bond ETF

In the current macroeconomic environment, fixed income investors have numerous options for attaining yield but getting active management is a different story, making the Eaton Vance Total Return Bond ETF (EVTR) particularly noteworthy. This ETF offers core exposure in an actively managed fund at a low cost, which is beneficial as interest rates are expected to stay high before eventually declining. 

 

Active management of the EVTR can provide the necessary flexibility to navigate the uncertainties of the bond market, especially with the volatility that has persisted into 2024. The fund's benchmark, the Bloomberg U.S. Aggregate Index, ensures a diversified mix of over 500 holdings, including safe haven Treasuries and higher-yielding bonds. 

 

Investors benefit from an attractive expense ratio of 0.39% and a 30-day SEC yield of 5.17%. The EVTR provides a comprehensive solution for core bond exposure or as a complement to existing bond portfolios, leveraging the expertise of Eaton Vance’s fixed income team.


Finsum: Typically, cost is the main concern with active management, but a cheap active exposure could be the goldilocks solution. 

Published in Bonds: Total Market
Wednesday, 26 June 2024 12:58

Two Income ETFs For Interest Rate Shifts

Since 2012, high-yield income stocks and ETFs have declined in value as rising interest rates have made bonds, Treasury bills, and CDs more attractive. However, buying high-yield ETFs now could be advantageous if interest rates decline in the future. Notable high-yield options include the JPMorgan Equity Premium Income ETF (NYSE: JEPI) and the JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ: JEPQ). Both ETFs use equity-linked notes (ELNs) tied to covered calls and have low expense ratios of 0.35%.

 

JEPI comprises 130 equities and routinely writes monthly calls on the S&P 500, yielding 7.5% annually. In contrast, JEPQ includes 98 equities and writes monthly calls on the Nasdaq-100, yielding 10.9% annually due to the Nasdaq 100’s higher volatility.

 

 Both ETFs offer steady monthly payments that are higher and less volatile than those from other dividend-focused ETFs, despite limited gains in strong markets due to their covered call strategies.


Finsum: As interest rates fall underlying bond prices could help boost the performance of these funds. 

Published in Wealth Management
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