Monetary policy, geopolitical tensions, and tariffs comprise the wall of worry that’s more than enough for any fixed income investor to scale. In today’s environment, a diversified income approach is imperative, setting the state for the one Neuberger Berman active ETF.
There’s no need to reiterate the importance of being well-diversified, especially after investors witnessed April’s sell-off. Equities markets have recovered for the most part. But any impending volatility moving forward can be shored up with fixed income assets.
“Investors will always be confronted with a changing financial landscape. Right now, it may seem more challenging than usual, but we see the income offered by fixed income as providing a stabilising force, offering diversity to more turbulent equity markets,” noted Alex Veroude, global head of Fixed Income at Janus Henderson Investors.
One thing’s for certain amid all the uncertainty: it’s an excellent time for yield. As seen in the chart below, yields are at elevated levels compared to years past, when they typically occurred just before or during a recession.
In terms of getting fixed income exposure, investors might be content with safe haven Treasuries. But as we learned with Moody’s recent credit downgrade, even government debt has its challenges. This is where having a diversified approach to income can benefit.
“By having a well-stocked kit bag that blends different forms of fixed income, investors have the potential to gain exposure to varied income streams and help insulate against risk in a particular area,” Veroude added. “Through an active approach – one that harnesses enduring trends and moves tactically to capture opportunities – we believe investors can progress more surefootedly towards their investment goals.”
A multi-income stream approach can be achieved through various means. A portfolio mixed with debt issues (namely bonds) sprinkled with other fixed income assets like mortgage-backed securities can make for a solid income diversifier. Investors should consult with an advisor to build a proper portfolio. But even for an experienced advisor, this can be tedious. This is where a fund like the Neuberger Berman Flexible Credit Income ETF (NBFC ) can provide assistance.
The actively managed fund has a 0.40% net expense ratio, making it a competitive option when comparing costs. Relative to its competitors, the fund is cost-effective, falling below the FactSet segment average of 0.64%.
A Flexible, Active Approach
Aside from cost, NBFC offers investors a flexible approach to today’s uncertain fixed income environment. The fund harnesses the capabilities of the Neuberger Berman Multi-Sector Fixed Income platform to search for opportunities in various credit markets.
The active management strategy allows it to search for the best-yielding assets. This includes fixed income streams that exhibit less volatility when compared to the high yield market. For those who aren’t willing to sacrifice credit quality to extract maximum yield, this is ideal.
Diving into the fund’s holdings in Q1 (January 2025) reveals a mixed bag of income assets. The ETF shows investments in mortgage-backed securities, asset-backed securities, corporate bonds, foreign government securities, and other short-term investments. The byproduct of this income diversification is a 30-day SEC yield of 6.81% (as of May 31).
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