PIMCO & Vanguard Weigh In

Active fixed income ETFs have been quite popular thus far in 2025. However, following the Fed’s rate cut, we expect demand to persist into year-end and into 2026. 

I have written a lot of words on this platform about active fixed income ETFs in 2025 as the category of ETFs swells in size. Not only is the supply of active ETFs growing, but so is the demand. Rather than offer my take (again), I’m going to lean on the insights of the attendees and the speakers from VettaFi’s Q3 Fixed Income Symposium.

At the event, we heard two hours of expert insights shared in a virtual fireside chat format. Assets managers such as PIMCO and Vanguard shared their views on the fixed income landscape the day after the Fed’s first rate cut in 2025. However, active management was a key discussion topic, and for good reason. 

During the event, we asked the advisor audience to describe their view of active management in fixed income. More than seven in ten respondents (71%) said they “believe active management can add value to investing.” This compares to nearly one in ten (9%) that “believe an indexed approach is best.”

Vanguard Is More Than an Index ETF Provider

To provide deeper, qualitative insights, let’s review what some of the experts had to say. Samuel Martinez is the head of active fixed income product management at Vanguard and was one of the panelists. During the symposium he said that “despite our reputation at Vanguard as being very index oriented or passive oriented, we have a very robust active business and it’s really been in our DNA since our founding over 50 years ago.” 

Martinez added that “we think there are a lot of alpha opportunities in fixed income. That’s proven to be the case. [Alpha] generally comes from security selection, how you build the portfolio bottom up. And then all of that’s enabled by scale, which matters because you need to bring substantial resources to this asset class to be able to drive value, to earn those basis points.” 

“Finally the gravy on top is getting a fair price point. We find that active funds that are in the lower quartile in terms of expense ratio tend to have similar upside capture ratios as more expensive products, but much better downside capture ratios. So what that means is there’s a greater tendency to outperform in up markets but also in down markets,” explained Martinez.

Vanguard has built out its active fixed income ETF lineup in the past six months. For example, in July 2025, the Vanguard Government Securities Active ETF (VGVT) launched. VGVT invests in intermediate-term Treasury and government agency bonds. Meanwhile, the Vanguard High-Yield Active ETF (VGHY) came to market this month and takes on higher credit risk in exchange for a greater yield. Vanguard offers a range of active ETFs, including those providing core and core plus exposure.

PIMCO: An ETF Pioneer With More to Offer

While some of Vanguard’s ETFs are new, we talked about active fixed income ETFs with PIMCO, which launched the first such fund more than 15 years ago. Jerome Schneider, head of short-term portfolio management at PIMCO, spoke at the Symposium in mid-September. He manages the PIMCO Enhanced Short Maturity Active ETF (MINT), which launched in late 2009. MINT takes on minimal interest rate risk through government securities and investment-grade credit. The ETF recently had a 30-day SEC yield of 4.3%. 

Schneider told the VettaFi audience that “the Fed rate cuts ultimately served as a wake-up call for many investors to check out how they’re managing their capital, but more importantly how they’re managing their cash and risk allocations on a go-forward basis.”  

“We would highlight that instantaneously as you wake up today, you’re seeing the yields on your money market funds, treasury bills reset to much lower levels. The destination that people are willing to accept lower rates for their cash definitely comes into question. One of the ways to manage around that is being more active, being more active in capital preservation and then being more active more broadly in terms of how you think about the opportunities in fixed income to drive total returns bound from a foundational element of income going forward,” Schneider explained.

Schneider also manages the PIMCO Ultra-Short Government Active ETF (BILZ). BILZ began trading in 2023 and offers a 30-day SEC yield of 4.1%. The ETF owns a mix of Treasuries and Agencies that have limited interest rate sensitivity.  In addition to BILZ and MINT, PIMCO has a broad suite of active fixed income ETFs to consider. 

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