Displaying items by tag: active fixed income

The bond market is undergoing a profound transformation as actively managed fixed-income ETFs gain traction among investors looking for more agile solutions. These funds combine strategic bond selection with the flexibility and transparency of the ETF format, offering a powerful tool for navigating an environment defined by volatility and uncertainty. 

Unlike passive strategies tied to static benchmarks, active managers can explore underfollowed sectors of the bond market, aiming for higher yields and stronger risk management. The ETF Rule of 2019 opened the floodgates for innovation, helping fuel a surge in actively managed ETF launches and inflows, particularly in fixed income. 

Investors are drawn to the structure’s real-time trading, lower embedded costs, and resilience in stressed markets—traits that are increasingly valuable in a dynamic rate environment. 

Finsum: Active fixed-income ETFs are becoming a key component of modern portfolio construction, reshaping how investors engage with the bond market.

In a turbulent macroeconomic environment, fixed income investments are regaining popularity for their ability to provide income, diversification, and potential capital appreciation. 

Experts at American Century Investments argue that active fixed income ETFs, like the American Century Multisector Income ETF (MUSI), offer strategic advantages over passive counterparts. Active managers can navigate beyond index constraints, tapping into overlooked sectors and exiting positions when valuations peak, unlike passive ETFs tied to benchmark requirements.

MUSI, in particular, leverages a data-driven approach to invest across diverse bond sectors—ranging from high-yield corporates to emerging market debt—with the goal of optimizing risk and return. 

Finsum: Expectations of upcoming interest rate cuts further strengthen the case for bonds, as falling rates could enhance bond yields.

Amid a turbulent market and new U.S. tariff regime, actively managed ETFs like the T. Rowe Price Small-Mid Cap ETF (TMSL) are gaining appeal for their flexibility, research depth, and outperformance potential. TMSL, which has outperformed the Russell 2500 Index by 170 basis points year-to-date, exemplifies how active strategies can navigate uncertainty and respond to evolving risks and opportunities. 

The new 10% blanket U.S. tariffs—unseen since 1946—have contributed to earnings downgrades and increased economic unpredictability, making adaptability a critical asset. Active managers can curate portfolios based on bottom-up analysis, selecting strong companies while avoiding those likely to underperform. 

TMSL’s focus on small- and midcap firms adds sector diversification to tech-heavy portfolios, with leading exposures in industrials, financials, and healthcare. 

Finsum: Its key to consider how fees play a role in active funds but many deliver well above depending on the economic environment. 

With inflation concerns lingering, advisors are closely monitoring the Federal Reserve’s next moves. The Fed held interest rates steady but raised its inflation forecast for the year, while also trimming its growth projection to 1.7%. 

Despite expectations for two rate cuts in 2024, economic uncertainty and potential trade disputes make forecasting difficult. Fixed income investors must remain adaptable, balancing inflation risks with the Fed’s evolving stance. 

Actively managed bond ETFs, such as the Eaton Vance Total Return Bond ETF (EVTR), offer flexibility in navigating rate shifts. By blending investment-grade debt with selective high-yield exposure, EVTR seeks to optimize returns while mitigating risk in an unpredictable market.

Finsum: Active fixed income tends to dominate in macro markets, and that is the current environment that is current environment exactly. 

Higher income returns supported strong bond market performance in 2024, with lower-quality credit outperforming amid favorable economic conditions. The 2025 outlook for fixed income remains positive, as real interest rates are expected to stay above inflation, offering attractive yields and portfolio diversification benefits. 

While monetary easing is likely to continue, it will proceed at a slower pace, and policy uncertainties—such as trade, immigration, and fiscal decisions—could introduce market volatility. 

Given these dynamics, a tactical approach to rates and credit strategies is recommended, with a preference for sectors that have lagged in spread tightening. Municipal bonds remain compelling for high earners, offering tax-equivalent yields above most taxable sectors. 

Finsum: Disciplined risk management and active security selection can help investors navigate an evolving fixed-income landscape.