With Wall Street nervousness growing over the number of rate hikes to come, VettaFi’s Todd Rosenbluth sees signs of a return in managed fixed-income exchange-traded funds and steers clear. passive ETF products.
“It’s unclear how quickly the Fed will decelerate and how quickly that will correct the market,” the company’s head of research told CNBC.next to ETF” this week.” So, [investors] want to rely on active managers to be able to do that.”
Top ETF providers like BlackRock’s iShares and Vanguard, and newer players like Morgan Stanley and Capital Group, are saturating the market with a range of fixed-income ETFs, Rosenbluth said.
“We just had more products,” he said. “You’ve got two of the top fixed-income ETF providers offering some of the biggest products. And they can balance their portfolio swings by stretching over longer periods of time. or get more or less credit based on the environment they’re seeing.”
According to Rosenbluth, this flexibility is appealing to investors by offering more opportunities to leverage active ETFs.
‘A stock-like experience through an ETF’
“You’re getting the benefits of that liquidity,” he said. “Even though you’re buying bonds, you’re getting a stock-like experience through an ETF.”
Jerome Schneider of Pimco notes that the benefits of active ETFs can help alleviate worries not only about additional rate hikes but also about the company’s earnings and liquidity conditions.
“These are the elements… [that] creates uncertainty for advisors as well as investors,” said Schneider, the company’s chief executive officer and leader of short-term portfolio funding and management.
He said Pimco, who Active bond exchange-traded fund down 2% so far this month, is advising clients on safe-haven opportunities amid this rising rate.
“The yield component of fixed income right now is something we haven’t seen in decades,” added Schneider.
