As the Federal Reserve navigates a shallow cut interest rate cycle in early 2026, financial advisors are needing to find new sources of income for portfolios.
With the Secured Overnight Financing Rate (SOFR) moderating toward 3.75%, the yield on the Bloomberg U.S. Aggregate Bond Index has retreated to approximately 4.16% as of January 12 2026. For portfolios, this means that investors will have to look beyond traditional fixed income to generate more yield.
The Simplify Private Credit Strategy ETF (PCR) offers a compelling alternative for maintaining high income in portfolios. PCR is based on the VettaFi Private Credit Index and targets a distribution rate that exceeds standard credit benchmarks. As of late 2025, PCR was yielding 12.3%, representing a significant premium over core bond funds.
The Floating-Rate Advantage for Income in 2026
Traditional bonds can carry significant duration risk in a shifting rate environment. However, the underlying Business Development Companies (BDCs) within PCR, such as Ares Capital (ARCC) and Blue Owl Capital (OBDC), primarily utilize floating-rate senior secured loans. This structure allows the fund to capture wider spreads even as benchmark rates soften.
Major BDC holdings like ARCC have maintained a conservative profile, with a weighted average yield of roughly 9.5% on its debt portfolio.
Furthermore, unlike closed-end funds (CEFs), PCR’s ETF structure provides daily transparency and liquidity – an important feature as advisors manage heightened market volatility.
For advisors, the strategic pivot from cash equivalents to PCR can help generate diversified yield in portfolios. By accessing the private credit premium through a diversified, institutional-grade vehicle, portfolios can secure a robust yield while maintaining the flexibility of the ETF wrapper.
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VettaFi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for PCR, for which it receives an index licensing fee. However, PCR is not issued, sponsored, endorsed, or sold by VettaFi. VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of PCR.
