Navigating the choppy waters of fixed-income investment has been a real nail-biter in recent years. The asset class, while serving up substantial yields, has failed to act as a stabilizer for portfolio volatility, leaving investors on edge.
The picture is unlikely to brighten anytime soon. The economy and interest rates are mired in uncertainty, signaling that volatility in fixed income might be here to stay. To weather this storm, fixed-income investors would do well to consider the life rafts of actively managed ETFs. These vessels are better equipped to navigate choppy waters, latching onto opportunities that elude their passive peers.
Indeed, as interest rate volatility began its ascent in 2022, active bond funds outshone their passive counterparts. Nevertheless, financial advisors have been dragging their feet to embrace the concept of active fixed income ETFs, showing a lingering preference for actively managed mutual funds instead. Capital Group revealed that a staggering 80% of assets in fixed income mutual funds are actively managed, while a paltry 12% of assets in fixed income ETFs share this distinction.
But the advantages offered by actively managed ETFs make a compelling case. Lower costs, enhanced liquidity, and tax benefits are just scratching the surface. Capital Group pins the slow adoption rate on a lack of awareness among advisors about the perks of active fixed-income ETFs. Another stumbling block is the scarcity of these ETFs among advisors, prompting the group to spearhead educational initiatives aimed at shining a spotlight on the virtues of active fixed-income ETFs over other options.
Finsum: It’s crystal clear that active fixed income ETFs hold the trump card over passive fixed income ETFs and actively managed fixed income mutual funds, especially in the current climate. Yet, these champions are still waiting for their crowning moment due to lingering inertia among advisors.
- bonds
- ETFs
- fixed income
- active etfs
- active management
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