As investors continue to expand their bond portfolios, they would do well to consider the Neuberger Berman Flexible Credit Income ETF (NBFC ). The fund offers high income and reduced volatility compared to high yield strategies, all without sacrificing yield.
An aggressive half-point initial rate cut from the Federal Reserve resulted in improved investor sentiment towards bonds. As advisors and investors look to broaden their bond portfolios, opportunity exists in a diverse range of bond sectors.
Those investors seeking high income opportunities within bonds or who prefer actively managed strategies in a dynamic macro environment should consider NBFC. The fund is actively managed and invests across a wide spectrum of credit securities and credit quality, both domestic and foreign. However, it does generally constrain foreign bond exposures to 40% of the overall portfolio. These include corporate bonds, mortgage- and asset-backed securities, municipal bonds, CLOs, convertible bonds, and more. It invests in investment grade, below investment grade bonds (junk bonds), and unrated bonds.
NBFC Offers Notable Distribution Yield Since Launch
The Neuberger Berman Flexible Credit Income ETF (NBFC ), launched in June, generated a distribution yield (or rate) of 6.97% as of 08/30/24. Distribution rate is calculated by annualizing the most recent distribution and then dividing it by the fund’s NAV. Since inception, the ETF has demonstrated reduced volatility compared to the broader bond market. The strategy seeks to offer high income with less volatility compared to the high yield sector.
The portfolio managers employ fundamental research and quantitative risk management tools when managing the strategy. By using an asset allocation framework that includes qualitative and quantitative factors, they decide bond sector allocations in order to gain exposure to the best relative value within each sector.
The PMs also consider the macro environment, the yield curve, individual credit analysis, and more when building the portfolio using bottom-up analysis. This analysis includes a review of a company’s balance sheet, market position, ability to pay its principal and interests, and cash flow.
NBFC doesn’t seek to maintain a specific average duration but the portfolio managers anticipate the strategy will maintain an average duration between two and eight years. It also may invest in derivatives such as futures, swaps, forwards, and options in order to hedge risk or for general portfolio efficiency.
NBFC carries a net expense ratio of 0.40%.
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