The same macro factors affecting the equities market, such as tariffs, geopolitical factors, and a changing interest rate policy are also affecting the fixed income markets. With that, there's never been a better time to access active fixed income strategies that help advisors and investors navigate the murky macro environment.
Advisors may sometimes feel like they're venturing out to solve the world's personal financial problems alone. This applies to entrepreneurs managing their own firms and intrapreneurs who are part of an existing firm.
The U.S. Federal Reserve instituted its first interest rate cut of the year, which could force investors to reassess their fixed income portfolios to plan for further monetary policy changes. Given this, it's an opportune time to consider using more flexible active funds in order to mute any rate cut noise.
The allocation into fixed income isn't just happening on a retail level. Increasingly, more allocation is happening with asset managers, including heightened interest in active management.
One of the prevailing trends in the ETF industry has been the proliferation of active funds. Based on results from Trackinsight's Global ETF Survey 2025.
With tariff news providing constant equity market fluctuations, the case for bonds becomes more compelling. The added uncertainty also punctuates the need for an active management strategy, which one particular Vanguard ETF offers.
The Vanguard Core Bond ETF offers an actively managed alternative to BND, aiming to outperform through security selection, sector allocation, and duration positioning within the investment-grade bond space. Since its late 2023 launch, VCRB has consistently outperformed BND, delivering a 140 basis point return advantage without significant volatility spikes. With a 6-year duration, a 4.8% yield to maturity, and low annualized volatility (5.2%), the Fund presents a compelling balance of income and rate sensitivity.
VettaFi recently sat down with Bill Coleman, Vanguard's head of U.S. ETF Capital Markets, at Exchange. Coleman discussed investor behavioral trends and the growing role that active ETFs are playing in portfolios.
A trio of Vanguard's bond offerings recently received their first Morningstar medalist ratings.
Unlike 2022, stocks and bonds are diverging once again, just as they should. This allows investors to reap the benefits of portfolio diversification, giving bond ETFs credence if economic growth slows and the stock market recedes.
With the first month of 2025 in the books, capital markets can still look to the previous year to prognosticate where the ETF industry is heading. In the case of bond ETFs, it was a strong year in 2024, and key areas could be touch points for investment opportunities.
Anxiety is starting to fill the bond market. That's because the capital markets are expecting fewer rate cuts amid a hotter-than-expected economy.