With rising rates and inflation causing so much uncertainty, advisors planning portfolios, particularly the fixed income portions, “really need to come up with some additional non-traditional ways of gaining that income,” according to Steve Deroian, U.S. co-head of retail product at John Hancock.
“We don’t know where the market’s going to go, and we don’t know what’s going to happen from a geopolitical perspective that could impact that,” Deroian said. “Things change so rapidly you never know.”
Speaking with NYSE’s Judy Shaw for ETF Leaders, powered by the New York Stock Exchange, Deroian explained that there are a few different ways for advisors to gain that income, whether it be through floating rate products, or through “less traditional areas like having a focus on mortgage-backed securities or having a focus on preferreds.”
In 2021 John Hancock launched three fixed income ETFs that can offer advisors more granular exposure to the fixed income market: the John Hancock Corporate Bond ETF (JHCB ) (focused on the corporate bond market), the John Hancock Mortgage-Backed Securities ETF (JHMB ) (targeting mortgage-backed securities), and the John Hancock Preferred Income ETF (JHPI ) (focused on preferreds).
“In this environment, we do believe that some non-traditional forms of income are going to be really important,” Deroian said at Exchange: An ETF Experience 2022.
The John Hancock executive also noted that many in the money management business “grew up more on the equity side” and “get a little intimidated by the fixed income market,” which leads them “to find single fund solutions.” Deroian believes “that is something that’s going to change,” as investors and advisors “become more comfortable with non-traditional forms of income.”
On the equities side, John Hancock continues to focus on its mid-cap space.
“We believe that mid-caps … [are] sort of in this sweet spot where they really do a nice job of protecting against some of the volatility that exists in small-cap but give you the real growth potential that maybe you might not be able to see in the large-cap space today,” Deroian said. Adding that going forward, the firm will look “more towards equity income as a solution, because we do think that the aging population is really going to need more income.”
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