The Index strategy is based on qualitative and quantitative inputs including economic data and interpretations of government policy. Asset allocation guardrails include 50% – 200% allocation relative to the benchmark for credit, duration, and structure/mortgage weight. A high-conviction exposure to more speculative or diversifying positions is constrained to 0% – 20%.
The characteristics below reflect how we would best position a portfolio of fixed-income ETFs to achieve maximum total return over a comparable baseline neutral portfolio of fixed-income securities (benchmark).
Relative Positioning
Duration
Neutral
Yield Curve
Slightly Bulleted
Corporate Credit
Underweight
Securitized
Overweight
Conviction
20% Senior Loans
Rationale
Neutral Duration
The Index remains at a neutral duration.
While the committee expects the economy and inflation to remain stronger than expected, the surge in yields since September warrants a neutral stance.
Slightly Bulleted Curve Position
The Index holds a bulleted curve position relative to the benchmark. The Committee opted to decrease the scale of the bullet structure in February.
Given the Fed’s projected cutting path, the committee anticipates the steepening could accelerate further, benefiting a bulleted structure.
70% Underweight Credit
The Index holds a 70% underweight position in corporate bonds relative to the benchmark due to strong corporate bond issuance and an overbought equity market.
130% Overweight MBS
In November 2024, the Index moved to 130% overweight MBS relative to its benchmark. The Index continues to hold this position.
20% Senior Loans
In February 2025, the committee allocated 20% to senior loans.
The Index continues to hold this position. This position offers a higher yield compared to corporate bonds with more covenants.
Allocation Changes
| Name | March 2025 | February 2025 |
|---|---|---|
| iShares MBS ETF | 35.60 | 26.70 |
| Invesco Senior Loan ETF | 20.00 | 20.00 |
| iShares 7-10 Year Treasury Bond ETF | 11.70 | 16.25 |
| Vanguard Long-Term Corporate Bond ETF | 11.10 | 7.65 |
| iShares 3-7 Year Treasury Bond ETF | 6.50 | 0.00 |
| Schwab Long-Term U.S. Treasury ETF | 5.00 | 6.95 |
| iShares BBB Rated Corporate Bond ETF | 4.50 | 4.70 |
| Simplify MBS ETF | 0.00 | 8.75 |