Actively managed ETFs continue to remain popular. In the first seven months of 2024, these funds gathered 25% of the industry’s net inflows. These funds represent 7% of the assets. Based on data from advisors who recently attended a VettaFi event, we may still be in the early stages of growth for active bond ETFs.
In late July, VettaFi hosted the Q3 Fixed Income Symposium with more than 400 attendees. During the event, we asked, “Which best describes your view of active management?” More than six in ten respondents (63%) “believe active management can add value to investing,” while less than one in ten (7%) “believe an indexed approach is best”. The remainder believed in pairing active and indexing strategies.
A few actively managed bond ETFs have historically led the asset category’s efforts. However, there are many strong products, including those from within the same family. Let’s discuss some of them.
Tax-Free Version of JPMorgan Ultra Short ETF
The JPMorgan Ultra-Short Income ETF (JPST ) is the largest active bond ETF. The $25 billion ETF offers a 5.4% 30-day SEC yield and has an average duration of 0.6 years. The low-rate sensitive fund has approximately half of its assets in investment-grade corporate bonds but also owns asset-backed securities, commercial paper, and CDs. James McNerny manages JPST.
Staying within the family, the JPMorgan Ultra-Short Municipal Income ETF (JMST ) has $2.7 billion. JMST has a similar duration to JPST (0.7 years) but owns high-quality bonds issued by municipalities, not corporations. Bonds issued in Alabama, California, Delaware, and Pennsylvania were recently among JMST’s top positions. On an unadjusted basis, JMST had a 3.6% 30-day SEC yield.
Taking on Slightly More Rate Risk at PIMCO
The PIMCO Enhanced Short Maturity Active ETF (MINT ) manages $12 billion. The capital preservation-focused ETF recently had a 5.3% 30-day SEC yield and a duration of 0.1 years. MINT is primarily a mix of investment-grade corporates and securitized debt. Jerome Schneider has been the long-time lead portfolio manager of this ETF.
Schneider is also the lead manager for a sibling fund, the PIMCO Enhanced Low Duration Active ETF (LDUR ). LDUR has $865 million in assets and sports a 4.9% yield. Relative to MINT, LDUR incurs moderately more interest-rate risk with its 1.5 years of average duration. This active PIMCO ETF has more U.S. government-related investments, not just corporate and securitized debt.
See related: VIDEO: ETF of the Week: PIMCO Active Bond ETF (BOND)
A Fidelity ETF Able to Seek Out a Higher Yield
With $11 billion in assets, the Fidelity Total Bond ETF (FBND ) is the largest active core bond ETF. FBND has a 5.1% 30-day SEC yield from a mix of U.S. government securities, mortgages, and primarily investment-grade corporate bonds. Approximately 12% of assets were rated BB or lower. This active Fidelity ETF will reach its 10th anniversary in October 2024.
Meanwhile, the Fidelity Tactical Bond ETF (FTBD ) launched in January 2023. This active bond ETF has broader access to seek out income across the debt markets. FTBD recently had 30% of assets in bonds with speculative-grade ratings. The ETF has a 5.5% 30-day SEC yield, but just $20 million in assets. It has yet to be discovered.
As advisors increasingly turn to actively managed ETFs, we expect more products to gain traction. Sometimes, it is good to look at others within the fund family. After all, I’m the younger brother in my family. As a kid, I initially benefited in school from my sister’s academic success. However, I still had to prove myself.
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