Amidst the prevailing atmosphere of uncertainty in the financial markets this year, a considerable number of investors find themselves in a peculiar position – sitting on the sidelines with ample cash reserves.
Despite the continued ambiguity surrounding potential rate cuts, one compelling option for investors seeking to capture current opportunities while managing risk effectively is the Natixis Loomis Sayles Short Duration Income ETF (LSST).
“A significant amount of cash remains idle on the sidelines,” remarked Todd Rosenbluth, the head of research at VettaFi. “We anticipate a growing trend among advisors turning towards actively managed short-term bond ETFs prior to the anticipated Fed rate cuts, aiming to capitalize on potential price appreciation.”.
The LSST ETF offers a dynamic and active investment approach to sector allocation and security selection. It is designed to target current income alongside capital preservation, facilitating the pursuit of higher yield potentials in short duration yield securities.
Unpacking the Allure of Short Duration Income
Short duration credit emerges as an enticing prospect due to its capacity to yield higher returns compared to Treasury bonds of similar durations. However, it is crucial to acknowledge that short duration credit comes with a slightly elevated credit risk and reduced liquidity when weighed against Treasuries.
Moreover, integrating short duration exposure into investment portfolios enhances the existing money market exposure. By opting for short duration exposure, investors can secure a more attractive yield than what is typically offered by a money market fund while introducing diversification into their portfolios.
For funds like LSST, the average duration stands at roughly two years, in contrast to money market funds which abide by a duration of less than 270 days as mandated by regulations, as highlighted by Nick Elward, Natixis Investment Managers’ senior vice president and head of institutional product and ETFs.
Curious for more insights? Check out: “Natixis Leverages Affiliate Expertise in Its ETF Lineup”
The ETF is under the management of a highly seasoned portfolio management team who benefit from the extensive credit and securitized research resources provided by Loomis Sayles. It is noteworthy that the managers handling LSST command a staggering $100 billion in assets globally, predominantly catering to institutional investors, according to Elward.
With a modest expense ratio of 35 basis points, choosing LSST proves to be a judicious and financial savvy decision for building up investment portfolios.
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The expressed viewpoints and opinions contained herein belong to the author and may not necessarily align with those of Nasdaq, Inc.
