According to a post-viewer poll following a VettaFi active fixed-income webcast, financial advisors seemed to be warming up to having more actively managed bond ETFs in their client’s portfolios. After viewing the webcast Active Fixed-Income Answers to Tight Monetary Policy, half of the respondents said that they are very likely to increase their exposure to active ETF strategies in the future, while 37.5% said they are somewhat likely to do so. The poll also found that "56% said they were concerned that owning passive index-only ETFs left them too exposed to market conditions without forward-looking risk controls or the ability to pivot to make changes, with 44% saying they were ‘very concerned’.” Todd Rosenbluth, head of research at VettaFi had this to say about the results, “With the heightened market volatility of 2022 likely to persist into the new year, advisors are increasingly interested in ETFs where, rather than shifting to a more offensive or defensive stance, they can take advantage of the expertise of managers who can shift exposure based on the latest developments.” With ETF firms launching more actively managed funds amid market volatility and inflation, investors are looking to active management to help guide their portfolios.
Finsum:A recent poll by VettaFi found that more advisors are seeing the importance of active fixed income in their client portfolios.
Institutional investor portfolios are expected to look very different next year. For the first time in years, short-term government bonds are yielding more than 4 percent. This could lead to widespread changes in asset allocation, as investors won't have to allocate as much to equities. When rates were near zero, institutional investors had more stocks in their portfolios than they would have liked as a higher equity allocation brought on more risk. But now that yields are much higher, investors can once again allocate to fixed income. Even CDs are yielding nearly 4 percent. Mike Harris, president of the quantitative manager Quest Partners told Institutional Investor that “When central banks were printing money and forcing rates close to zero…people said, ‘We don’t want any fixed income in the portfolio,’ which is crazy to me. It’s been a building block of traditional portfolios for as long as I can remember. Investors were adamant about finding ‘somewhere else to park that capital,’ even if that meant taking on unwanted risk.” Now that bonds are much more appealing due to the higher yields, Harris expects that there are going to be some significant changes in asset allocation.
Finsum:A rise in yields for low-risk bonds could have major implications for institutional asset allocation next year.
It looks like alternative asset classes are writing a story of their own.
Someone say Kurt Vonnegut’s name written all over them? After all, he always seems to have one trick or another up his literary sleeve.
Its been a never before seen year in the equity and fixed income markets, according to fa-mag.com. Global equities receded close to 20% as of June 30. Meantime, high quality fixed income jetted backwards by around 10%. Historically? Well, it was the darkest start to a year in the bond market since, get this, 1842. Just keeps getting better, eh?
Well, it’s a different ballgame for those asset classes. During the year, the cocktail of real estate, real assets, hedge funds, private equity and private debt nudged aside both equities and fixed income.
Okay, sure, alternative asset classes have caught a little heat for their fees, minimums and illiquidity. This year, however? Well, they’ve larded on a great deal of value. The question: will this trend sustain itself?
A release of its findings earlier this month of its most current Selling Retail Investment Products through Intermediaries Report, based on 810 confidential interviews of U.S.-based financial advisors in September, found a three point jump in the use of alternatives, according to insights.issgovernance.com. It was 39% in Q4 of 2021 to 42% in June of this year.
JPMorgan Asset Management recently announced the upcoming launch of three new fixed-income BetaBuilders ETFs. The funds, which will launch in February, will provide exposure to the aggregate, investment-grade corporate, and high-yield corporate bond markets. All three will be converted from three existing actively managed ETFs. The JPMorgan BetaBuilders US Aggregate Bond ETF (BBAG) will be created from the $1.2 billion JPMorgan US Aggregate Bond ETF (JAGG). The fund, which will come with an expense ratio of 0.03%, will track the Bloomberg US Aggregate Bond Index and invest in Treasury, government-related, corporate, and securitized fixed-rate bonds from issuers worldwide. The JPMorgan BetaBuilders USD Investment Grade Corporate Bond ETF (BBCB) will be converted from the $40 million JPMorgan Corporate Bond Research Enhanced ETF (JIGB). BBCB will track the Bloomberg US Corporate Bond Index, consisting of investment-grade bonds from corporate issuers worldwide. The ETF has an expense ratio of 0.09%. The final ETF, the JPMorgan BetaBuilders USD High Yield Corporate Bond ETF (BBHY), will be created from the $400m JPMorgan High Yield Research Enhanced ETF (JPHY). BBHY will track the ICE BofA US High Yield Total Return Index, covering sub-investment-grade, corporate bonds issued in the US market. The fund has a slightly higher expense ratio of 0.15%
Finsum:JPMorgan adds to its suite of BetaBuilders ETFs with the upcoming launch of aggregate, investment-grade corporate, and high-yield corporate bond ETFs.
There is no doubt that government bond and corporate debt markets have taken a beating this year due to inflation and rising interest rates. But that may change next year if two fixed-income strategists are correct. On Tuesday, Gurpreet Gill, macro strategist, global fixed income at Goldman Sachs Asset Management said that “The year ahead is shaping up as the most promising for fixed income in over a decade.” While speaking at the Edelman Smithfield Investor Summit in London, Gill noted that valuations in fixed-income markets were looking more appealing than they were a year ago. This included emerging markets and corporate bonds. She stated, "We think it makes sense to be in high-quality short-duration assets, in agency mortgage-backed securities markets in the U.S." Gill isn’t alone in those thoughts. Sara Devereux, global head of Vanguard Fixed Income Group, said last Friday that “The recent debt rally brought the chance to reduce credit exposure and buy mortgage agency securities based on valuations, setting up what promises to be a bond picker’s paradise in the new year.”
Finsum:Two fixed-income strategists expect next year to be a great year for bond pickers due to lower valuations.
Invesco continues to expand its ETF lineup with the launch of four new actively managed ETFs. The new fund offerings include the Invesco AAA CLO Floating Rate Note ETF (ICLO), the Invesco High Yield Select ETF (HIYS), the Invesco Municipal Strategic Income ETF (IMSI), and the Invesco Short Duration Bond ETF (ISDB). All four funds were launched last Friday and trade on the CBOE. ICLO, which has an expense ratio of 0.26%, invests in floating-rate note securities issued by collateralized loan obligations (CLOs) that are rated AAA or equivalent. HIYS invests in higher quality below investment grade fixed income securities, such as corporate bonds and convertible securities. The fund charges 0.48%. IMSI has an expense ratio of 0.39% and invests in municipal securities exempt from federal income taxes and in other instruments that have similar economic characteristics. ISDB invests in fixed-income securities such as high-yield bonds and other similar instruments and aims to maintain a portfolio maturity and duration between one and three years. The ETF charges 0.35%.
Finsum:Invesco bolsters its active stable of ETFs with the launch of four fixed-income ETFs that invest in CLOs, high-yield bonds, munis, and short-duration bonds.