Investors anxiously await the latest announcement from the White House on Wednesday regarding new tariffs on imports. Advisors and investors looking to hedge against volatility and longer-term inflationary impacts of tariff wars would do well to consider the Neuberger Berman Short Duration Income ETF (NBSD ).
At market close on Wednesday, the current administration is set to roll out its latest set of sweeping tariffs. It remains unclear if they will be blanket tariffs on most imports, or a more selective, reciprocal tariff approach to those countries that responded to original U.S. tariffs.
The ever-changing and uncertain nature of the current administration’s approach to tariff policies continues to drive volatility in markets. Thus far, the only real certainty is that there will be more — and higher — tariffs as trade war tensions escalate. Hedging in lower-risk strategies, such as short duration bonds, could prove advantageous in the current market and economic environment.
The actively managed NBSD seeks to generate reliable income while providing an investment-grade, short duration profile for portfolios. Short-term bonds often prove appealing for their reduced rate risk in challenging environments. In addition, investment-grade bonds generally carry a low credit risk. Combining the two creates reliable income potential for portfolios when market volatility and uncertainty rise.
With much uncertain about tariffs and inflation looking ahead, short duration bonds appear attractively positioned. NBSD invests across a variety of sectors and bond types, including fixed- and floating-rate investment-grade bonds, both foreign and domestic. These can include asset- and mortgage-backed securities, collateralized debt obligations (including CLOs), and credit risk transfer securities.
The strategy creates a portfolio of diversified, short duration bond exposures across sectors and credit quality. Top bond sector exposures included investment-grade credit (37.7%), securitized credit (35.5%), and noninvestment-grade credit (11.5%) as of December 31, 2024 according to Neuberger Berman data. Top credit quality weights were BBB at 30.4%, A at 19.2%, and AAA at 16.0% over the same period.
The management team considers qualitative as well as quantitative factors when selecting securities. They search for underpriced bonds, both on a sector level as well as within peer groups. While 80% of the fund comprises investment-grade bonds, up to 20% may be below investment-grade. When investing in these junk bonds, the fund managers seek issuers in relatively strong financial health and whose credit scores may increase.
NBSD carries an expense ratio of 0.35%.
For more news, information, and analysis, visit the Invest Beyond Cash Channel.
