At the end of April 2025, active ETFs managed $331 billion in assets, equal to a 17% share of the market. Assets have grown at a 37% compounded annualized growth rate over the past 10 years, per JPMorgan. As VettaFi recently noted, there are also some lesser known actively managed fixed income ETFs quickly gathering assets.
My colleague Kirsten Chang highlighted increasingly popular products from Fidelity, TCW, and T Rowe Price. I wanted to make note of one from a newer ETF entrant: Sterling Capital. I will be speaking with them on a webcast for advisors on Monday May 19.
A Top Down Approach to Active Fixed Income
The Sterling Capital Enhanced Core Bond ETF (SCEC) launched two months ago in March. However, SCEC is already approaching $400 million in assets. In managing the portfolio, the team uses a top-down approach focusing on interest rate risk, allocation among sectors, credit risk, and individual securities selection. Sector weightings are driven by a combination of the team’s macro view on interest rates and volatility, as well as relative spread analysis. Utilizing fundamental analysis, management then selects individual securities consistent with the target. They look for the best relative values within particular sectors.
At the end of March, SCEC was overweighted to securitized debt relative to the Bloomberg Barclays Aggregate index. While management modestly favored mortgage backed securities (29% vs. 26%), commercial mortgaged-backed securities (12% vs. 1.5%) and asset-backed securities (8.9% vs. 0.5%) were significantly overweighted. Meanwhile the fund was significantly underweighted to Treasuries (25% vs. 46%) and industrial corporate bonds (8.7% vs. 14%).
The Impact of Tariffs on Monetary Policy
Ahead of next week’s webcast, VettaFi wanted to catch up with management about the macroeconomic environment. Below are the key takeaways.
- The Trump administration has sought to deescalate trade tensions after dramatically raising the average U.S. tariff rate on imported goods to nearly 20%. This is a level not seen since the 1930s. The tariffs will increase the cost of foreign goods to businesses and consumers, thus eroding real purchasing power. Further continued policy uncertainty will keep capital allocators on the sidelines. Businesses and consumers alike take a more cautious approach to spending. Regardless of the exact ending level of tariffs, Sterling Capital expects them to lead to meaningfully slower growth this year compared to last year, while inflation moves higher.
- The Fed held rates steady at its May meeting. It reinforced its belief that interest rates are in a good place given the degree of uncertainty in the outlook. Tariffs represent a real challenge for the Fed. They will slow growth and thus pressure the labor market while simultaneously pushing inflation higher. Sterling Capital expects little forward guidance from the Fed this year, as they will remain highly data dependent while trying to meet their dual mandate.
- Valuations remain tight given the current environment, particularly in corporate credit, and we bias our risk allocation to higher quality assets as Sterling Capital awaits further information around monetary and fiscal policy and how the economy performs amidst a shifting policy.
I hope you will join me this Monday at 2pm ET. Advisors that register and attend will receive CE credits.
For more news, information, and analysis, visit VettaFi | ETFDB.
