Taking a closer look at your fixed income allocation? With rate cuts in the rearview mirror, but more potentially on the way, it may be time to do so. With the year nearing an end and tax-loss harvesting on the horizon, too, many investors are likely shifting assets. Given that that may be the case, it’s worth considering an active corporate bond ETF like KORP. The fund is beating its benchmark and offers some intriguing potential.
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Why look to an active corporate bond ETF? For those managers sitting on active mutual funds, ETFs offer some real upside. ETFs offer tax advantages compared to mutual funds thanks to their creation/redemption mechanism. What’s more, ETFs’ transparency and tradability also boost their outlook.
The gap between active ETFs and passive mutual funds is even wider. Active management can play a really helpful role in fixed income. Active management can help navigate an ever-changing landscape of rolling bonds and shifting yields.
The active corporate bond ETF KORP presents one option. The American Century Diversified Corporate Bond ETF (KORP), has stood out recently, returning 7.3% YTD compared to 5.7% for its benchmark, the Bloomberg U.S. Intermediate Corporate Bond Index. From a yield perspective, the strategy offers a 4.8% 12-month distribution rate.
KORP has done so for a 29 basis point (bps) fee, a relatively low fee compared to other active funds. The fund actively invests in U.S. corporate debt. That could offer a particular appeal should a soft landing ease conditions for U.S. corporations. KORP focuses mainly on investment-grade debt but also invests some assets in risker junk-rated debt.
With more than $300 million in AUM, the strategy may stand out to fixed income curious funds. For those looking at their options, an active corporate bond ETF like KORP may appeal.
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