Investors are weighing whether a pivot away from rising interest rates by the Federal Reserve may come soon, and traders are considering a portfolio pivot of their own with longer-dated bonds. Long-term expectations are reflected in the funds, which are less susceptible to policy changes. And according to Strategas, Treasurys and cash-like bonds have been the two most popular ETF categories ranked by inflows this year. “The rising-rate environment has been the story of the year, and so investors are looking for new tools in their playbook,” Bryon Lake, global head of ETF Solutions at JPMorgan Asset Management, told Bob Pisani on CNBC’s ‘ETF Edge’ on Monday.
Lake runs the JPMorgan Ultra-Short Income ETF (JPST), which is currently the largest actively managed ETF in the world. The fund has a three-month duration and is currently yielding 3.2% on the SEC 30-day, he said, and 4.4% on its yield to maturity. “Investors are using JPST as a place to hide out while they wait for the market to find its footing,” he said. The actively managed ETF invests primarily in a diversified portfolio of short-term, investment grade fixed-and floating-rate corporate and structured debt. “One of the good things about the Fed hiking rates is short duration, or money market funds, are actually paying something now,” Tom Lydon of VettaFi added on ‘ETF Edge’ on Monday. Lydon stressed that three components of JPST, the three-month duration, active management, and net asset value, lead to a more attractive yield. “If you’ve kept your powder dry, and you’re looking for areas where you can actually make some money these days, it’s a great opportunity,” he said.
