Making moves with your fixed income allocation? As investors reshuffle their portfolios, many may be looking to tax-loss harvest into ETFs. Even before tax-loss harvest season began, ETFs had taken a big leap forward. Amid that push, active fixed income ETFs have been a standout, with the active bond ETF SMTH a recent highlight. The fund has gathered hundreds of millions of inflows since launching in December 2023, pushing its AUM over $1 billion.
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That rapid pace may owe to a growing interest among investors in fixed income ETFs compared to fixed income mutual funds. ETFs offer real advantages in tradability, transparency, and perhaps most significantly, in tax efficiency. ETFs create fewer “taxable events” compared to mutual funds, which matters when finding efficiencies for advisor clients.
What’s more, the active side of the equation can really differentiate a fund from rivals. An active bond ETF can apply more scrutiny and lean more on manager experience to navigate the everyday churn of bonds. With rolling expiration dates and a wide variety of credit quality levels, active management can prove a powerful tool.
That’s where SMTH, the ALPS/SMITH Core Plus Bond ETF, comes in. SMTH empowers its managers to actively invest in global debt securities of any maturity and credit quality. It looks for a high level of current income as well as capital appreciation. The active bond ETF takes a bottom-up approach, going beyond traditional bonds, too, via commercial loans, mortgage-backed securities, and more. Its managers consider factors like yield, liquidity, call risk, and credit ratings to assess potential investments.
“SMTH’s asset gathering success has been tremendous and is credit to the expertise the team brings," said VettaFi’s Head of Research Todd Rosenbluth. "We have seen growing adoption of active fixed income ETFs this year but SMTH has been one of the standouts.”
That approach has helped the fund return 9% since inception per SS&C ALPS Advisors data. That has helped the fund beat the Bloomberg U.S. Aggregate Bond Index in that time. For investors looking to shift fixed income assets toward active management, SMTH could appeal.
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