It appears that active bond funds have actively outperformed their stock market peers, according to Morningstar data.
“About 84% of active bond fund managers outperformed in the one-year period ending June 30, 2021, compared to just 47% of active equity fund managers, according to a Morningstar semi-annual report. . CNBC reports.
The time for an active bond fund strategy may be now as the Federal Reserve begins to reduce its bond purchases. Last year, the Fed strengthened the bond market by purchasing a number of bond ETFs to help thwart credit risks posed by the pandemic.
Actively managed funds provide dynamic positioning in bond markets, which can help mitigate credit risk. For example, the Bloomberg Aggregate Bond Index currently holds around 15% BBB-rated bonds.
“Just by owning the index, you have a lot more credit risk, which may not necessarily be the right positioning to have in the current environment… with moderate growth and a variety of central bank policies. creating a propensity for a little more volatility in the future ”, noted Jérôme Schneider of Pimco, who also stressed the importance of the agility of active managers, especially when the Fed’s rate hike measures are still on hold.
An ETF active in emerging markets to consider
As demand for active funds increases, the strategy could be particularly useful when it comes to emerging markets (EM). While they can expose an investor to potential growth opportunities, emerging markets have their own set of nuances that require active strategy.
This certainly applies to emerging market bonds, which investors can access through an actively managed ETF with the Emerging Markets Bond ETF X (EMBD). While cost can be a factor when it comes to actively managed funds, EMBD has an expense ratio of 0.39%, which is lower than its category average.
EMBD is an actively managed fund under-advised by Mirae Asset Global Investments (USA) LLC that seeks a high level of total return, comprised of both income and capital appreciation, by investing in emerging market debt. EMBD invests primarily in emerging market debt securities denominated in US dollars. However, the fund may also invest in securities denominated in applicable local foreign currencies.
The securities may include fixed and floating rate debt securities issued by sovereign, quasi-sovereign and companies in emerging countries. This adds a touch of diversification to an investor’s core bond portfolio.
EMBD offers investors:
- Experienced portfolio managers: EMBD’s portfolio managers have extensive experience in actively managed emerging debt strategies.
- Competitive cost: With a total expense ratio of 0.39%, EMBD offers the outperformance potential and risk management of active portfolio managers, at a competitive cost.
- High Return Potential: By targeting emerging market debt securities, EMBD aims to offer high returns with low correlations with other fixed income securities.
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