ETFs have breathed new life into active management, due in part to the union of fixed income and ETFs. Some fresh faces are contributing to that trend, including the Neuberger Berman Total Return Bond ETF (NBTR ).
NBTR, which debuted last December, may be new in the bond ETF arena. However, it’s already clear that this fund can be a viable alternative for advisors and investors seeking income streams and returns that could potentially exceed those typically offered by passive aggregate bond funds. The widely observed Bloomberg U.S. Aggregate Bond Index is the gauge NBTR attempts to beat. Importantly, the Neuberger Berman bond fund provides end users with access to advantages inherent to bonds in the ETF wrapper.
“Fixed income ETFs democratise market access by allowing investors to gain exposure to diversified bond portfolios through a single, easily tradable instrument. This levels the playing field, enabling even small portfolios to participate in markets that were once the domain of large institutions,” according to BNP Paribas.
NBTR Goes Beyond the Norm
Many of the legacy passive ETFs with which NBTR competes feature large rosters, but those portfolios lean heavily into Treasuries and U.S. government agency debt. That’s fine from a credit quality perspective, but it can leave investors wanting more.
NBTR goes beyond basic bond approaches, leveraging active management to identify sector-level credit opportunities as well as duration opportunities. The fund’s duration flexibility is all the more relevant following the Federal Reserve’s recent interest rate cut — a move that opens the door to more reductions, which could stoke upside for longer-date bonds.
One thing NBTR shares in common with older bond ETFs is the significant advantages of fixed income mutual funds. In plain English, NBTR has tradability.
“Unlike traditional mutual funds, which can only be traded at their net asset value at the end of the trading day, ETFs are unique in that they can be bought and sold on an exchange throughout the trading session without incurring significant transaction costs,” added BNP Paribas. “This feature is particularly valuable during periods of market volatility, allowing investors to respond swiftly to changing conditions and optimise the timing of trade execution.”
Additionally, the cost of admission with NBTR is favorable. An annual expense ratio of 0.37% stacks well compared to many competing mutual funds. Plus, bond ETFs often sport tighter spreads than rival mutual funds, which can drive down the total cost of ownership.
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