The time for active fixed income may have truly arrived. After years of significant active ETF growth, many investors may be more comfortable with an active approach to those funds. The newfound popularity of active ETFs may have come just in time, as a complicated fixed income picture looms for investors. Adding more active flexibility in a core fixed income allocation, then, could prove a shrewd move. The low cost active bond ETF AVIG presents a strong opportunity to do so.
See more: 3 Active Fixed Income ETFs to Watch as Fed Stops Cuts
The Avantis Core Fixed Income ETF (AVIG ) charges a 15 basis point fee, low for an active fund. The strategy actively invests in both U.S. and non-U.S.-issued fixed income securities. The low-cost active bond ETF invests in all kinds of debt securities from government and corporate-issued bonds, focusing on investment-grade offerings.
Specifically, the strategy seeks bonds with higher expected returns, assessed via an analytical framework. That framework considers bonds’ expected income levels and potential capital appreciation. The ETF’s managers consider groups of debt securities segmented by metrics like credit rating and industry sector. Then, they calculate expected return as implied by the yield curve. Together, the low-cost active bond ETF aims for a weighted average maturity within two years of the Bloomberg Agg.
That approach has helped the ETF offer a 4.84% 30-day SEC unsubsidized yield as of January 31, per Avantis Investors data. What’s more, the strategy also offered a 4.98% yield to maturity, according to that data set. Additionally, AVIG has returned 2.34% over one year, as of January 31. That has beaten the ETF’s benchmark, the Bloomberg Agg, in that time.
With rates steady, but Treasurys in question amid government policy shifts, an active ETF approach could stand out. For those looking for a low-cost way to add active focus and adaptability compared to inflexible index funds, AVIG may merit a look.
For more news, information, and analysis, visit the Core Strategies Channel.
