Rate cuts feel as though they have never been closer, but they’ve still yet to materialize. While the rate cut discussion has often focused heavily on the stock market impact, headlines have focused less on the impact on fixed income. Rate cut uncertainty means a great deal about how investors should be looking at fixed-income opportunities. That speaks to the case for TOTR, which could provide a helpful option for investors.
See more: T. Rowe Price Adds First Active Tax-Free Bond ETF to Roster
That strategy, the T. Rowe Price Total Return ETF (TOTR ), charges a 32 basis point (bps) fee. The strategy, which will hit its three-year ETF milestone next month, actively invests in a diversified group of fixed-income securities. The ETF considers debt offerings from corporate bonds to bank loans and asset-backed securities.
TOTR, further, can invest in securities of any maturity, with a high yield exposure of up to 35%. The ETF has returned 3.25% over the last one-year period, beating its benchmark’s 2.6% return, per T. Rowe Price data. The strategy leans on T. Rowe Price’s proprietary fundamental research process to analyze the fixed income securities that comprise the portfolio.
An active fixed income ETF can offer quite a bit given that rate cut uncertainty. Where index funds are required to follow the rules of their index to a letter, active funds can adapt. Active fixed income ETFs, in particular, could even have a built-in advantage over their passive rivals. Rolling over bonds, given their various maturities, may simply not be as effective with a passive fund compared to an active one. A changing rate environment may favor the advantages and responsiveness of an active strategy.
With a range of potential rate cuts coming this Fall, investors may want to prepare. The active fixed income ETF TOTR could offer one solution for that rate cut uncertainty.
For more news, information, and analysis, visit our Active ETF Channel.
