Mike Sanders

A New Risk-Controlled Fixed Income ETF

October 24, 2023

As interest rates have risen dramatically over the past year, income-oriented funds have become more attractive. With the income finally back in fixed income, advisors are searching for new opportunities to generate yield while mitigating risk in their bond investments. That’s why Madison Investments recently launched its first suite of four income-oriented ETFs. Two of the funds in its suite – the Madison Aggregate Bond ETF (NYSE: MAGG) and the Madison Short Term Strategic Income ETF (NYSE: MSTI) – seek to capitalize on the growing demand for dynamic, risk-managed fixed income strategies.

Portfolio Manager and Head of Fixed Income, Mike Sanders, was recently interviewed in the Gaining Perspective podcast, discussing how advisors can use these actively managed ETFs to get the most value out of their fixed income allocation.

Important disclosures:

Bloomberg U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, mortgage backed-securities, asset-backed securities, and corporate securities, with maturities greater than one year.

An investment in the fund is subject to risk and there can be no assurance the fund will achieve its investment objective. The risks associated with an investment in the fund can increase during times of significant market volatility. The principal risks of investing in this fund include: interest rate risk, call risk, risk of default, liquidity risk, mortgage-backed security risk, credit risk and repayment/extension risk, non-investment grade security risk and foreign security and emerging market risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. More detailed information regarding these risks can be found in the individual fund’s prospectus.

High yield bonds are considered lower-quality instruments known as “junk bonds”. Such bonds entail greater risks than those found in higher-rated securities and, as a result, investments in the fund entail more risk than investments in average bond funds. More detailed information regarding these risks can be found in the fund’s prospectus.

The Fund’s investment strategy reflects Madison’s general “Participate and Protect®” investment philosophy. Madison’s expectation is that investors in the Fund will participate near fully in market appreciation during bull markets and experience something less than full participation during bear markets compared with investors in portfolios holding more speculative and volatile securities. Therefore, the Fund’s investment philosophy is intended to represent a conservative investment strategy. There is no assurance that Madison’s expectations regarding this investment strategy will be realized.

Diversification does not assure a profit or protect against loss in a declining market.

A basis point is one hundredth of a percent.

Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. Duration measures how long it takes, in years, for an investor to be repaid the bond’s price by the bond’s total cash flows.

Agency Bonds are securities issued by a government-sponsored enterprise or by a federal government department other than the U.S. Treasury.

Asset-backed securities are bonds made up of a collection of consumer debts.

Mortgage-backed Securities (MBS) are bonds made up of a collection of residential or commercial mortgages.