Making moves for 2025? Before investors know it, Halloween, Thanksgiving, and the holiday season will all be over. With that, it may be time to reassess investors’ fixed income allocations. Many investors are doing the same, with ETFs providing an appealing means to do so. An active bond ETF like TOTR, for example, could offer an especially appealing appeal, having recently celebrated its third birthday as a fund.
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TOTR, the T. Rowe Price Total Return ETF, launched in September 2021. Charging only a 32 basis point (bps) fee, the strategy looks to maximize total return via U.S. debt offerings. The active bond ETF leans on T. Rowe Price’s fundamental research capabilities, assessing instruments from corporate bonds to bank loans and agency debt to mortgage-backed securities. In doing so, it retains the freedom to invest across maturity levels.
That approach has helped the active bond ETF return 12.2% over the last one-year period, according to T. Rowe Price data. This has outperformed the fund’s benchmark, the Bloomberg U.S. Aggregate Bond Index, by 66 basis points. The strategy has also offered a 4.8% 30-day SEC Standardized Yield, according to data from September 30th.
Investors may be considering active fixed income ETFs not only for ETFs’ tax efficiency and transparency but also given the changing investing environment. The first set of rate cuts have come and gone, but more are likely on the way. While bonds responded quite well to a live rate market returning over the last year and change, investors may not be prepared for how bonds will respond to dropping rates. An active, total return ETF like TOTR could provide a solution therein, adapting as the market shifts.
Looking ahead, as more investors move towards active fixed income ETFs, a strategy like TOTR could stand out. For those considering options therein, the active bond ETF could be worth considering for a shift into 2025.
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