On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research, Todd Rosenbluth, discussed the Thornburg Multi-Sector Bond ETF (TMB) with Chuck Jaffe of Money Life. The pair discusses several topics related to the fund to give investors a deeper understanding of the ETF.

Chuck Jaffe: One fund, on point for today. The expert to talk about it. Welcome to the ETF of the Week!

Yes, this is the ETF of the Week, where we get the latest take from Todd Rosenbluth, the head of research at VettaFi. And if you go to VettaFi.com, you’ll find all the tools you need to be a savvier, smarter ETF investor, and to get more details on the new, newsworthy, trending, and timely ETFs that we discuss right here. Todd Rosenbluth, it’s great to chat with you again!

Todd Rosenbluth: It’s great to be back!

Chuck Jaffe: Your ETF of the Week is…

Todd Rosenbluth: The Thornburg Multi-Sector Bond ETF, ticker TMB.

Chuck Jaffe: TMB, the Thornburg Multi-Sector Bond ETF. You know, it was just like two weeks ago, we were talking about the oldest actively managed fixed income ETF. This is one of the newest actively managed fixed income ETFs, very different from MINT, which we talked about, the PIMCO fund, because that’s ultra-safe.

This is multi-sector, but given that we’re in an environment where everybody’s expecting rate cuts, a new multi-sector bond fund, right as we’re thinking rate cuts are coming? What’s up, Todd?

Todd Rosenbluth: Well, first of all, what’s up, Chuck? I guess I’m supposed to say that back to you as if we’re back in the ’90s. So, listen, we want to give the range of different strategies for people to consider.

TMB is a relatively new ETF, you’re right. It launched earlier this year. Thornburg is not new to active fixed income. In fact, they run the Strategic Income mutual fund that I think is a several-billion-dollar and four-star rated mutual fund with a similar overall investment approach. And so what the overall investment approach is, is to take on additional risk and find the opportunities. Taking on credit risk or taking on interest rate risk, sorting through the fixed-income universe to find the best opportunities, as opposed to just short-term Treasuries or short-term agency or short-term corporate bonds that we talked about with MINT.

So, we think this environment — people are embracing actively managed fixed-income ETFs. We think this is an environment when the Fed is likely to begin cutting interest rates. You want to have somebody who’s got experience. We think this is an environment where there are lots of tools that are out there. Thornburg packages that up into one ETF. We think it’s worth a closer look, even though it’s relatively new.

Chuck Jaffe: You know, we talk about bond ETFs all the time. But one of the things that underlies bond ETFs — but it’s also other picks that you’ll make, things like when we’re talking about international investing or emerging markets investing. Where you say that people are not necessarily diversified enough. You’ll say, you know, folks don’t have much exposure to this, et cetera.

Is this one of those cases where when folks think of bonds, they don’t really think multi-sector? “Let me go get a manager and have them juke around the minefields of the fixed-income market to get me a better return.” They kind of think fixed income, “it’s my safe haven,” and they’re going with picks like MINT, right? Is this also for you something of a diversification play? Because this is not your plain-vanilla fixed income.

Todd Rosenbluth: Correct. So this is going to offer you more diversification. Tap into the various tools — well, not tools, but sectors that you can invest in outside of Treasuries and investment-grade corporate bonds. So MINT is more of a cash-like investment, a little bit more income, a slight bit of interest-rate sensitivity. You’re going to get more of that, more interest-rate risk, you’re going to have more credit risk than you’re going to have in TMB.

We find many people in fixed income, they just own the AGG. They just own investment-grade corporate bonds and Treasuries in a low-cost manner. Or, they’re believers in active management, and they’ve had mutual funds. And I think the world is coming together.

This ETF, TMB, taps into the expertise from a firm that’s been a long-time manager of active strategies in the mutual fund world, but has brought that expertise into the fixed-income ETF world. We think this is a great opportunity for people to diversify, and if they’re more willing to take on risk as the Fed is going to be cutting interest rates, this is a good way of doing that in a controlled manner. It has some non-investment grade exposure — not a lot, but some exposure — when the opportunities arise.

Chuck Jaffe: As a result, what’s an anticipated yield? This fund is so new that certain yield measures, I don’t think, are ready to be calculated yet. But is there an expected yield or something you would think that this fund is shooting for?

Todd Rosenbluth: So I think it’s going to have certainly more than what you’d get in a traditional investment-grade corporate bond exposure. I think the yield when I last looked at it was close to 5%. You’re right, it’s relatively new. This fund launched in February, so it doesn’t have a 12-month — an actual 12-month yield, but I think you’ll still be able to find some yields. So you’re going to see additional income in exchange for taking on some additional risk in a diversified manner.

Chuck Jaffe: Is this also the case of, if you’re going to go for active management, you know, understand what the purpose of active management is? If you’re in a fund that is collared by its asset class — in other words, it’s straight munis or it’s Ginnie Maes or it’s U.S. Treasuries or what have you — the manager, well, they can do what they can in that sector, but they can’t go in other directions.

We’re about to see rate cuts, or we assume we’re about to see rate cuts. We don’t quite know the extent. But this ultimately would be the time that you want a fund like this. Give your manager some freedom to go make you some money at a time when the market’s changing, right?

Todd Rosenbluth: That’s certainly the case. And so, I’m looking at the fund breakdown of assets on the website. And the fund is overexposed to corporate bonds relative to its benchmark. It’s underexposed to U.S. Treasuries and mortgages. And it has a healthy weighting in asset-backed securities.

Is that the right call? We shall see as the year progresses. But this is what the benefits of active management are. You’re going to have somebody, and hopefully an experienced somebody, in a team that is going to provide top-down oversight to understand where those best opportunities are, as opposed to if you own the AGG, it is heavily weighted — I keep using the AGG — that’s the iShares Aggregate Bond ETF. Vanguard has an index-based version that’s similar as well. That index-based strategy is heavily weighted toward Treasuries. Here, you’re going to have underexposure to that. So this can also fit in nicely into a portfolio for people who believe in active management.

Chuck Jaffe: It’s an interesting pick for these times. And again, new fund, long track record for the management running stuff in this sector. It’s TMB, the Thornburg Multi-Sector Bond ETF, the ETF of the Week from Todd Rosenbluth at VettaFi. Todd, great stuff. Talk to you again next week!

Todd Rosenbluth: Thanks a lot, Chuck.

Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yeah, I’m Chuck Jaffe, and I’d love it if you check out my hour-long weekday podcast. You can find it at MoneyLifeShow.com or on your favorite podcast app.

Now, if you’re trying to find information on your favorite ETF, or maybe your next favorite ETF, one you’ve heard about here, no better place to go looking for information than VettaFi.com. They’ve got a full suite of tools that’s going to help you make the right decisions for you. They’re on X at @Vetta_Fi, and Todd Rosenbluth, their head of research, my guest, he’s on X as well at @ToddRosenbluth.

We’ve got a new ETF of the Week for you every Thursday. Make sure you don’t miss any of them by following along on your favorite podcast app. And we’ll be back with that ETF for you to consider again next week. Until then, happy investing everybody.

Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.

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