Tariff mayhem continues to cause volatility in markets as investors attempt to make sense of continuous changes. In a tumultuous environment, investors increasingly turned to actively managed bond ETFs this year according to JPMAM research.
The onset of blanket and country-specific tariffs the week of April 7th, followed by a roll-back of tariffs targeted at specific countries 12 hours later sent equities plummeting and then soaring briefly. Increases to China tariffs the same day (at a rate of 145%) were followed over the weekend with announcements of tariff exemptions for smartphones, computers, chips, and other electronics. However, lack of clarity on the exemptions, and threats of either impending or a resumption of tariffs on these categories only add to uncertainty.
Confusion remains pronounced around U.S. economic and trade policy, but the perception of U.S. instability appears to be growing. While equities went for a rollercoaster ride last week, bonds largely sold off at a time when the safe haven asset would traditionally prove most appealing. This in turn sent yields skyrocketing, as bond prices and yields move inverse. Yahoo Finance reported the 10-year Treasury logged its largest surge in yields (on a weekly basis) the week of April 11 since November 2001.
A number of potential factors may have gone into selling. These include investors moving from bonds to cash, international investors fleeing U.S. markets, and even the unwinding of the basis trade. The basis trade is a leveraged strategy used by hedge funds to make money on price differences between a Treasury futures contract and a Treasuries security as the future nears expiry.
Navigating Challenging Markets With Active Strategies
At the same time that tariffs went into effect and bonds prices plummeted, the ICE U.S. Dollar Index (DXY) dropped, and continues to fall. DXY is down over 8% as of April 11, 2025 according to Y-charts data. Dollar devaluation carries much larger potential implications for U.S. debt and as the global reserve currency. Much remains unknown for now, but advisors and investors should keep a close eye to these trends.
Ahead of the tariff-caused market crash in April, investors already demonstrated notable interest in actively managed strategies. As of the end of the first quarter, 39% of all flows into ETFs went to actively managed funds according to ETF Insights from J.P. Morgan Asset Management.
Data from Bloomberg, Morningstar, J.P. Morgan Asset Management as of 03/31/25
Image source: J.P. Morgan Asset Management
In March, actively managed bond strategies proved extremely popular with investors. Notably, actively managed ultrashort bond ETFs, which drew in $5.2 billion in AUM for the month according to JPMAM research, the largest category across all active ETF flows. Actively managed, intermediate core-plus bond ETFs also saw strong inflows, at $3.5 billion.
In an environment of pronounced uncertainty and volatility, actively managed strategies may prove a boon for advisors and investors alike. Investors can harness the benefits of knowledgeable managers within their respective categories while relying on dynamic, responsive strategies. Meanwhile advisors can take back the time that research and actively managing a strategy might take and instead apply it to client-facing needs during tumultuous times.
Actively Managed Ultra-Short Duration Bond ETFs With JPMAM
JPMAM offers a variety of actively managed bond ETFs to meet client needs. For those looking to position defensively within bonds, the JPMorgan Ultra-Short Income ETF (JPST) is worth consideration. The strategy seeks current income and relies on insights from over 154 short-term fixed income professionals worldwide when constructing the portfolio.
JPST offers diversification within the short-term bond category by investing in floating-rate and fixed investment grade corporate and structured debt. The strategy seeks a duration less than a year and the fund managers manage duration and credit exposures for current market environments. The fund is also competitively positioned with a 0.18% management fee.
For those advisors and investors looking to ride out bond uncertainty in ultra-short exposures while optimizing their tax profile, the JPMorgan Ultra-Short Municipal Income ETF (JMST) could prove beneficial. The fund seeks current income that is exempt from federal income tax. It does so by investing in investment grade fixed-, variable-, and floating-rate municipal bonds. The strategy seeks to maintain portfolio duration less than a year while actively managing duration and credit exposures. JMST carries management fees of 0.18%.
For more news, information, and analysis, visit VettaFi | ETFTrends.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.
Read more articles by Karrie Gordon
