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3 Great Active ETFs for Bond Investors

Strong teams underpin these highly rated options.

3 Great Active ETFs For Bond Investors
Securities In This Article
Fidelity Total Bond ETF
PIMCO Active Bond ETF
JPMorgan Limited Duration Bond ETF

Daniel Sotiroff: Higher interest rates mean bonds and bond ETFs look a lot more attractive today than they did just a few years ago. At the same time, more and more bond managers are dipping their toes into the shallow end of the ETF ocean. But the key to success with actively managed bond ETFs is no different than mutual funds: Stick with the best of breed, and keep your fees low.

3 Great Active ETFs For Bond Investors

  1. JPMorgan Limited Duration Bond ETF JPLD
  2. Fidelity Total Bond ETF FBND
  3. Pimco Active Bond ETF BOND

I’ll kick things off with an ETF that sits at the short-end of the curve and is somewhat new to the ETF world. Last July, J.P. Morgan converted JPMorgan Limited Duration Bond to an ETF from a mutual fund, and it now trades under the ticker JPLD. Then, a subsequent People Pillar upgrade to High from Above Average in September earned it a Gold Morningstar Medalist Rating.

Graduating to a High People rating is by no means easy. Comanagers Michael Sais and Bob Manning bring decades of experience to the table. Their approach emphasizes short-term mortgage-backed and asset-backed securities, and they stand out in their ability to select top-performing agency mortgage-backed bonds. JPLD lands in the short-term bond category with a duration that runs around 1.5 years, so it shouldn’t fluctuate too much when interest rates change. And the price is right. JPMorgan charges just 0.24% annually for this ETF.

Next up is Gold-rated Fidelity Total Bond ETF, ticker FBND. It’s one I’ve spoken about before because it’s one of Morningstar’s favorite actively managed core bond ETFs. Co-lead managers Ford O’Neil and Celso Munoz steer an excellent team of managers and analysts. They allocate to a wide range of bonds across the maturity spectrum, so it’s expected to be a little more sensitive to interest-rate changes than JPLD. They can also invest a larger fraction of the portfolio in high-yielding bonds and emerging-markets bonds when the risk/reward trade-off looks favorable.

Fidelity charges 0.36% per year, and it’s been worth the additional cost. FBND beat the Bloomberg US Aggregate Bond Index by more than 0.7 percentage points annualized from its October 2014 launch through the end of April 2024.

Silver-rated Pimco Active Bond ETF, ticker BOND, is another broad bond ETF, but it differs from FBND in some important ways. Pimco revisited this ETF’s underlying strategy in May 2017. Since then, it has focused on income rather than total return.

Pimco even changed the management team in 2017 to help meet the new objective. It added David Braun for his expertise in managing income-focused portfolios, while Dan Hyman and Jerome Schneider were tapped for the excellent results they have delivered on other funds they oversee.

BOND’s emphasis on income comes with a trade-off. It has tended to provide above-average income but middling total returns compared to its peers in the intermediate-term core plus category. Focusing on the former often means sacrificing the latter. But the managers distinguish themselves by navigating those waters without taking on a lot of risk—a trap that others can easily fall into. All told, the sound process and excellent management team should continue to deliver reasonable risk-adjusted performance over the long term.

Watch How to Find a Great Dividend Fund for more from Daniel Sotiroff.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Daniel Sotiroff

Senior Analyst
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Daniel Sotiroff is a senior manager research analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers passive strategies.

Before joining Morningstar in 2017, Sotiroff was as a design engineer at Caterpillar, where he worked on front-end loaders for heavy construction and mining applications.

Sotiroff holds a bachelor's degree in mechanical engineering and a master's degree in applied mechanics, both from Northern Illinois University.

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