Why actively managed ETFs are ideal for fixed income strategies


AAt the end of last month, T. Rowe Price launched three new additions to its line of actively managed funds – the first fixed income ETFs offered by the company, as noted in a white paper.

The previous five ETFs were all equity-based following various investment strategies; the introduction of the T. Rowe Price Total Return ETF (TOTR), the T. Rowe Price QM US Bond ETF (TAGG), and the T. Rowe Price Ultra Short Term Bond ETF (TBUX) This is the first time the company has moved its fixed income strategies from mutual funds to an ETF envelope.

“Fixed Income Exchange Traded Funds (ETFs) are a natural evolution of T. Rowe Price’s product offerings, providing access to our expertise in active fixed income management in a versatile format that offers all the benefits of ETFs Wrote the authors of the paper.

The advantages of using an ETF are numerous and include the convenience of trading anytime, the low cost structure compared to mutual funds, and their tax efficiency in trading. The ability of an ETF to trade on a stock exchange at any time of the day while carrying a basket of securities within a security allows for diversification and flexibility and allows investors to react to changing market conditions as they arise. as they occur.

ETFs tend to cost less than their mutual fund counterparts because they typically have more limited operating expenses, reporting, and customer service. The ETFs offered by T. Rowe Price all have a unit fee structure, which means they charge a one-time fee to cover each expense instead of breaking them down into management fees and other expenses. They are also generally able to reduce capital gains incurred during trading activity, making them more tax efficient than mutual funds.

“Our ETFs benefit from the investment expertise of our actively managed strategies in addition to the benefits offered by the ETF envelope,” said the authors. Combining all of these benefits, investors can now pursue fixed income investing with T. Rowe Price, an area in which they see active management really shining in a market that still produces historically low returns.

The three fixed income ETFs are all managed by the same investment teams who use the same strategies for the mutual fund counterparties. The Company’s global team of credit analysts are involved in the selection of securities from all of the Company’s fixed income portfolios. Mutual funds and ETFs may have slight differences, sometimes reflecting different performance.

“Making our proven bond strategies available through actively managed ETFs is another way of delivering on our commitment to deliver our investment management capabilities through products and vehicles that best meet our clients’ needs,” wrote the authors.

For more news, information and strategies, visit the website ETF channel active.

Learn more at ETFtrends.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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