The Pros Fail to Meet the Moment With Bond ETFs
Actively managed fixed-income ETFs stumbled last year and only 40% are beating their benchmarks in 2023.
Federal Reserve Chair Jerome Powell is keeping markets under pressure.
Photographer: Alex Wong/Getty Images North AmericaThe pitch for an actively managed bond exchange-traded fund can be compelling, especially when there’s market turmoil and uncertainty: Let a pro handpick bonds that can outperform benchmarks instead of investing in an index-tracking fund on autopilot, but pay less than you would for a mutual fund. Oh, and you can save on taxes, too.
More investors are taking the bait. Last year, active ETFs accounted for 14% of overall ETF flows even though they made up just 4% of assets, according to a report from Bloomberg Intelligence analyst Eric Balchunas, who tracks the data. So far this year, more than 30% of incoming flows are to active ETFs. In addition, since 2021, dozens of such funds have been unveiled, including versions from big names like Vanguard Group and JPMorgan Chase & Co.