With the direction of interest rates in constant flux, a continuous go-to strategy for bond exposure is still short duration debt issues. That said, consider an active approach with the +Neuberger Berman Short Duration Income ETF+ (NBSD ).
A short-term bond strategy helps mitigate rate risk while the Federal Reserve mulls whether it should resume its rate-cutting trajectory, remain unchanged, or pivot toward hikes. Right now, according to the CME FedWatch probability data, the likelihood is the Fed will continue to stand pat.
Following early April’s sell-off, a flight to short duration bond funds resulted as investors were wary of further volatility on the horizon. With major investment firms predicting a potential recession ahead, short-term bond funds could continue to gain inflows.
“Every time new news comes out that increases the chance for large U.S. or foreign tariffs to be a reality, the risk of recession increases and we should expect more flight into the relative safety of short-term government bonds,” said Brian Huckstep, chief investment officer at Advyzon Investment Management.
An Active Short Duration Solution
Given the rate uncertainty, NBSD’s focus on short-term bonds is ideal. Inherent in the fund is an active management strategy that allows portfolio managers to adjust holdings and tailor exposure to current market conditions when warranted. The net 0.35% expense ratio makes it accessible to fixed income investors who are wary of active funds being too “expensive.”
To minimize credit risk, the fund adds exposure to bonds with investment-grade profiles. The weighted average duration of its holdings is just under two years, obviously skewing toward short duration bonds. A “peek under the hood”: reveals its top 15 holdings are mostly of the corporate bond variety. With the recent downgrade in U.S. government debt, the heavier tilt toward corporate bonds is ideal. Along with higher yields, corporate bonds have also been fundamentally sound lately and could be insulated from further tariff volatility.
NBSD’s diversification is apparent in its holdings, which is over 500. The fund adds exposure to a variety of sectors and bond types. Those may include fixed- and floating-rate investment-grade bonds in or outside of U.S. borders. For added yield opportunities, the fund can also dip into other fixed income assets like asset- and mortgage-backed securities, collateralized debt obligations (including CLOs), and credit risk transfer securities. Speaking of yield, the fund carries a 30-day SEC yield of 5.33% as of April 30.
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