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Active Bond ETFs on Tap as Interest Rates Clim


As interest rates begin to rise from a three-decade low, bond investors are getting jittery. Consequently, the exchange traded fund industry is moving to launch actively managed offerings to help investors hedge against rising volatility in the fixed-income markets.

According to a Cerulli Associates survey in the first quarter, 57% of sponsors intend to launch actively managed fixed-income ETFs this year, InvestmentNews reports.

“Investors and financial advisers want strategies beyond the typical intermediate-term-bond fund,” said Alec Papazian, an associate director at Cerulli. “In a period of rising interest rates, they see value in active management.” [Treasury ETFs Continue Sell-Off as 10-Year Yield Climbs Above 2.6%]

Papazian also points to the highly successful adaptation of PIMCO’s flagship total return fund, the PIMCO Total Return ETF (BOND) , which has gathered about $4.6 billion in a little over a year. PIMCO is also planning to launch active ETFs based on its PIMCO Diversified Income, PIMCO Real Return and PIMCO Low Duration fund strategies.

Fidelity Investments also received the greenlight from teh SEC to launch actively managed bond ETFs. However, the company is holding off to assess current market conditions.

“Active bond ETFs haven’t been tested under stress yet,” Ron O’Hanley, president of asset management at Fidelity, said in the article. “We’ve still got some stress testing to do.”

In February, First Trust launched its actively managed First Trust High Yield Long/Short ETF (HYLS) , which has gathered $25 million in assets. [First Trust Launches Active High-Yield ETF]

Colombia management Investment Advisers LLC has filed with the SEC to launch 17 new active ETFs in fixed-income, which include municipal and taxable-bond funds, and equity segments.

The U.S.-listed ETF market has 1,466 products offerings with $1.4 trillion in assets. In comparison, there are only 60 actively managed ETFs with $14.2 billion in assets under management.

For more information on active funds, visit our actively managed ETFs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.