In 2026, Active Fixed Income Is the Way to Go

Core Insights - The Federal Reserve's decision not to lower interest rates has created uncertainty in the bond market, leading to increased headline risk for investors [1] - Active management in fixed income, exemplified by the ALPS/SMITH Core Plus Bond ETF (SMTH), is gaining traction as a strategy to navigate these turbulent times [1] Industry Trends - The bond ETF market has seen significant growth, with nearly $430 billion flowing into bond ETFs in 2025, representing about 30% of all ETF inflows for that year [1] - The number of bond ETFs available has steadily increased since 2019, indicating a rising interest among investors [1] Company Performance - The ALPS/SMITH Core Plus Bond ETF (SMTH) has grown to $2.45 billion since its launch two years ago, highlighting its success in the active fixed income category [1] - SMTH differentiates itself from standard passive aggregate bond ETFs by offering innovative strategies that may benefit long-term investors [1] Competitive Landscape - The equity ETF market is perceived as saturated, making it challenging for issuers to create new and compelling equity ETF ideas, while the fixed income space still offers ample room for innovation [1] - Active managers, like those managing SMTH, can invest in bonds that are not accessible to index-tracking ETFs, providing them with unique advantages [1]