3 Core Bond ETFs That Are Coping Well With Rising Rates

SPDR DoubleLine Total Return Tactical ETF (NYSEARCA:TOTL)

SPDR DoubleLine Total Return Tactical ETF (NYSEARCA:TOTL) is an excellent selection for those that want an active approach to fixed-income. This fund is managed by Jeffrey Gundlach of DoubleLine Capital using a multi-sector approach to its asset allocation. It’s a fund that I currently own for myself and clients of my wealth management firm.

The advantage of an active fund like SPDR DoubleLine Total Return Tactical ETF (NYSEARCA:TOTL) is that it has more flexibility in security selection and risk management capabilities than an index. The fund manager can increase or decrease the effective duration, as well as shift assets towards areas of the bond market they feel offer greater value. There are also limits (or guidelines) on sector exposure that make this fund suitable as a diversified core holding.

Right now, TOTL yields 3.02% and has an effective duration of 5.02 years. It also carries exposure to bank loans, emerging market debt, and other asset backed securities that you won’t find in many benchmarks.

It’s worth pointing out that SPDR DoubleLine Total Return Tactical ETF (NYSEARCA:TOTL) charges an expense ratio of 0.55%, which is significantly higher than a passive ETF. As an active fund, it is also susceptible to underperform its benchmark if its positioning doesn’t blend well with the fixed-income environment. Nevertheless, this fund has weathered the recent jump in interest rates in a much smoother fashion than its peer group.

PIMCO ETF Trust (NYSEARCA:BOND)

PIMCO ETF Trust (NYSEARCA:BOND) has always been a leader in fixed-income and its flagship total return bond fund continues to perform at a strong pace. The most interesting thing about BOND is its use of futures and currency swaps to manage risk. The portfolio is currently balanced between conventional U.S. fixed-income exposure paired with interest rate hedges, inflation protected bonds, and emerging market debt.

Over the last six months, this has led to diminished price volatility versus the Barclays benchmark.

PIMCO ETF Trust (NYSEARCA:BOND) takes a team approach to its credit and security selection criteria within the BOND portfolio as well. The effective duration is currently 5.71 years with a 30-day SEC yield of 2.70%. Its objective has always been one of a core holding for investors to utilize in lieu of a diversified index. Furthermore, the fund charges a similar expense ratio to TOTL at 0.56% annually.

For full disclosure, we currently recommend BOND for subscribers to the Flexible Growth and Income Report.

This post originally appeared on Investorplace.com.

Note: This article is written by David Fabian and was originally published on the FMD Capital Management blog. FMD Capital Management is a fee-only investment advisor which provides daily updates on ETFs, portfolio strategies, and market insights. Contact them for a free portfolio review.