Active Fixed Income ETFs Offer Alpha Opportunities

Jason Greenblatt, senior portfolio manager and director of corporate credit research at American Century Investments, joined host Nate Geraci on ETF Prime to make the case for active fixed income ETFs in today’s market environment.

Greenblatt on Active Investing

American Century, a top 15 ETF issuer with $93 billion in total ETF assets, launched its first active ETF eight years ago. Greenblatt now manages three actively managed fixed income ETFs and explained why active management can add value in bond markets.

Bond indices typically hold about 75% in government securities, which limits yield potential. Greenblatt highlighted how active managers can access the primary market before new bonds enter indices, allowing them to capture better pricing.

He also pointed to the investment-grade corporate bond market, which includes over 7,000 bonds from 800 issuers compared to just 500 stocks in the S&P 500. This creates pricing inefficiencies that active managers can exploit, especially in bonds with split credit ratings.

Greenblatt detailed an innovative refinancing strategy. American Century buys bonds, contacts the company’s CFO or treasurer, and facilitates refinancing deals. This lowers fees for issuers while providing premium exits for the fund — an approach passive funds cannot replicate.

On positioning, Greenblatt favors the two to five-year duration range where investors can earn 5% to 6% yields with less volatility. He warned against owning 30-year investment-grade corporates for carry, citing excessive interest rate and spread risk. Greenblatt also expressed skepticism about private credit in ETFs, questioning the ability to provide accurate pricing throughout the day.

The episode opened with Greg Stumm, CEO of American Beacon Partners, who discussed how his firm provides distribution and operational scale to boutique asset managers. Stump outlined American Beacon’s work with firms like Ark Invest and Man Group, emphasizing the importance of differentiation in an increasingly competitive landscape.

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