The Federal Reserve held its benchmark interest rate steady at 3.5% to 3.75% Wednesday, marking a pause in the easing cycle that began in September 2025, according to the central bank’s policy statement.
The Fed’s policy statement indicated that “economic activity has been expanding at a solid pace” while “inflation remains somewhat elevated.” The central bank said it will “carefully assess incoming data, the evolving outlook, and the balance of risks” before making further rate adjustments.
The pause means rate cuts won’t provide a lift to bond prices in the near term. While CNBC notes this decision was “widely expected,” it changes the equation for passive investors who can no longer ride the wave of falling yields. That’s creating an opportunity for active managers to stand out by choosing individual bonds rather than holding the entire market.
Bond Fund Navigates Fed Rate Pause
The ALPS Smith Core Plus Bond ETF (SMTH ) shows how that approach works in practice. Rather than simply tracking a bond market index, the $2.35 billion ETF adjusts allocations across corporate credit, mortgage-backed securities and Treasuries based on where managers see the best value, according to SS&C.
The fund decreased its corporate credit exposure during the third quarter of 2025 as corporate bond prices rose, according to SS&C. Managers sold bonds which they believed had limited upside. They also added exposure to newly issued bonds, which can trade at better prices than existing securities.
Portfolio managers Gibson Smith and Eric Bernum maintain what they describe as a “defensive posture,” prioritizing quality and liquidity, according to SS&C. The approach resulted in the fund holding slightly more corporate credit than the index, with managers emphasizing higher-quality names.
SMTH returned 7.07% over the 12 months ending December 31, 2025, according to the fund’s factsheet. The fund launched on December 5, 2023, and carries a 0.59% expense ratio.
The ETF holds $2.35 billion in assets and saw $1.02 billion in net inflows over the past year, according to ETF Database.
Smith Capital Investors noted in third-quarter commentary that “security selection will have to be a key focus to preserving capital and avoiding uncompensated risks within the market” as the Fed navigates its policy path, according to SS&C.
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