The favored ETF technique shift can profit buyers
As jitters mount on Wall Street over the number of rate hikes ahead, VettaFi’s Todd Rosenbluth sees signs of a comeback in managed fixed income exchange-traded funds and away from passive ETF products.
“It’s not clear how quickly the Fed will slow down and how quickly this will adjust the market,” the company’s research director told CNBC’s ETF Edge this week. “So, [investors] I want to lean on the active managers.”
Rosenbluth said top ETF providers like BlackRock’s iShares and Vanguard, as well as newer players like Morgan Stanley and Capital Group, are saturating the market with a wide range of fixed income ETFs.
“We have more products right now,” he said. “They have two of the top fixed income ETF providers offering some of the biggest products. And they’re able to offset their portfolio shifts by adding more duration or borrowing more or less depending on the environment they see.”
According to Rosenbluth, this versatility attracts investors because it offers more opportunities to leverage active ETFs.
“Equity-Like Experience Through ETFs”
“They benefit from that liquidity,” he said. “Even though you’re buying bonds, ETFs give you a stock-like experience.”
Pimco’s Jerome Schneider notes that the benefits of active ETFs can help ease fears not only of further rate hikes but also of corporate earnings and liquidity conditions.
“These are factors… [that] create uncertainty for advisors and investors alike,” said Schneider, Managing Director and Head of Short-Term Portfolio Management and Financing.
He told Pimco that’s Exchange traded active bond fund Down 2% so far this month, advises clients on safe opportunities in this rising interest rate environment.
“The yield component of fixed income is something we haven’t seen in decades right now,” Schneider added.