Clients may love the relative safety of cash, but many advisors know those assets could do more. A multisector bond approach for example, offers plenty of rewards for those willing to dive in. The right ETF can give tax efficient exposure to the space, providing both yield and total return. The multisector bond ETF FUSI may be a standout candidate, having recently received a 5-star rating from Morningstar.
Key Takeaways:
- Many investors still have big cash allocations, but they may be leaving yield on the table.
- An active multisector bond ETF can lean on manager experience and active adaptability to find the right bond segments to provide some strong yield.
- FUSI recently hit a few big milestones that may make it a notable option within that category.
(FUSI ), the American Century Multisector Floating Income ETF, charges a 27 basis point fee to actively invest in global floating rate securities. The strategy applies a sector rotation approach that primarily includes securitized debt like CLOS, floating commercial mortgage securities, and asset-backed securities. It may, with its active purview, invest about a third of its assets into sub-investment grade securities.
The fund’s managers consider macroeconomic factors, as well as technical analysis and fundamental research, to target better yield and capital appreciation potential. Finally, it can also use derivatives to generate income or hedge exposure as needed.
The active multisector bond ETF has returned almost 6% over the last three years with that process. In terms of yield, it offered a 5.4% 12 Month Distribution Rate as of March 31, according to American Century Investments. Together, these results contributed to the fund receiving a 5-star rating from Morningstar just as the strategy reached its three-year milestone on March 14.
See more: How a Quality Screen Helped This International Equities ETF Beat the Average
So, while cash and Treasury type options do offer a degree of investor comfort, leaning into an active multisector bond ETF can potentially make for a smarter investment. By getting those assets to do a bit more work — and with a bit more risk — investors and advisors can get a bit more yield from their bond allocations.
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