3 Great Active ETFs for Bond Investors

Higher interest rates mean bonds and bond exchange-traded funds look a lot more attractive today than they did just a few years ago. At the same time, more and more bond managers are dipping their toes into the shallow end of the ETF ocean. But the key to success with actively managed bond ETFs is no different than mutual funds: Stick with the best of breed and keep your fees low.

3 Great Active ETFs For Bond Investors

1. JPMorgan Limited Duration Bond ETF JPLD
2. Fidelity Total Bond ETF FBND
3. Pimco Active Bond ETF BOND

JPMorgan Limited Duration Bond ETF

Kicking things off is an ETF that sits at the short end of the curve and is somewhat new to the ETF world. J.P. Morgan converted the JPMorgan Limited Duration Bond to an ETF from a mutual fund in July 2023, and it now trades under the ticker JPLD. Then, a subsequent People Pillar upgrade to High from Above Average in September 2023 earned it a Gold Morningstar Medalist Rating.

Graduating to a High People rating is by no means easy. Comanagers Michael Sais and Bob Manning bring decades of experience to the table. Their approach emphasizes short-term mortgage-backed and asset-backed securities, and they stand out in their ability to select top-performing agency mortgage-backed bonds. JPLD lands in the short-term bond Morningstar Category, with a duration that runs around 1.5 years on average, so it shouldn’t fluctuate too much when interest rates change. And the price is right. J.P. Morgan charges just 0.24% annually for this ETF.

Fidelity Total Bond ETF

Next up is Gold-rated Fidelity Total Bond ETF. It’s one I’ve mentioned before because it’s one of Morningstar’s favorite actively managed core bond ETFs. Co-lead managers Ford O’Neil and Celso Munoz steer an excellent team of managers and analysts. They allocate to a wide range of bonds across the maturity spectrum, so it’s expected to be a little more sensitive to interest-rate changes than JPLD. They can also invest a larger fraction of the portfolio in high-yielding bonds and emerging-markets bonds when the risk/reward trade-off looks favorable.

Fidelity charges 0.36% per year, and it’s been worth the additional cost. FBND beat the Bloomberg US Universal Index by more than 0.4 percentage points annualized from its October 2014 launch through the end of October 2024.

Fidelity Total Bond ETF Outpaces the Aggregate Index

Pimco Active Bond ETF

Silver-rated Pimco Active Bond ETF is another broad bond ETF, but it differs from FBND in some important ways. Pimco revisited this ETF’s underlying strategy in May 2017. Since then, it has focused on income rather than total return.

Pimco even changed the management team in 2017 to help meet the new objective. It added David Braun for his expertise in managing income-focused portfolios, while Dan Hyman and Jerome Schneider were tapped for the excellent results they have delivered on other funds they oversee.

BOND’s emphasis on income comes with a trade-off. It has tended to provide above-average income, but middling total returns compared with its peers in the intermediate core-plus bond category. Focusing on the former often means sacrificing the latter. But the managers distinguish themselves by navigating those waters without taking on a lot of risk—a trap that others can easily fall into. All told, the sound process and excellent management team should continue to deliver reasonable risk-adjusted performance over the long term.

Pimco Active Bond ETF Offers a Higher Yield