Advisors Upgrade Bond Playbooks for Year-End

In late October, VettaFi hosted an interactive virtual event featuring market leaders from State Street Investment Management, Janus Henderson, and Horizon. During the presentation, advisor sentiment polls revealed a decisive shift in how many are approaching their fixed income allocation. Higher yields have restored bonds as a compelling asset class. However, advisors were looking for tools beyond a traditional index-based bond ETF.Key TakeawaysFollowing strong equity gains in 2026, 71% of surveyed advisors in late October were cautiously rebalancing money back into fixed income. Over 40% of allocators told VettaFi they favored active core bond approaches to manage duration and credit risk. Floating-rate instruments and investment-grade corporate bonds were also more popular than Treasuries. “The conversation has changed from whether to own bonds to how to own them,” explained Samarth Sanghavi, head of fixed income products at TMX VettaFi. “With investment-grade corporates yielding north of 5%, fixed income is finally pulling its weight in portfolios again. As the Fed hikes, duration is the key risk to manage. I like staying intermediate in investment-grade credit and pairing it with floating-rate products in this cycle.”Rebalancing Equity Gains Into YieldIn the first nine months of 2026, investors have benefited from a remarkably strong stretch for both U.S. and international equity benchmarks. As a result, advisors were planning on taking some profits and locking in multiyear high yields across fixed income.According to poll results from the event, 71% of responding advisors indicated they are cautiously rebalancing into fixed income. Rather than making aggressive allocations, advisors are incrementally building bond positions while preserving portfolio flexibility.Why Active Strategies Are Winning Some Core AllocationsAs many advisors rebuild their fixed income sleeves, they are looking for alternatives. During the VettaFi webcast, panelists discussed how traditional market-cap-weighted bond indexes like the Bloomberg US Aggregate Bond index have become increasingly Treasury-heavy. Investors in ETFs tied to the index are less sector-diversified, leaving them exposed to interest rate swings.To solve this, 42% of polled advisors selected an active core bond approach as their preferred strategy. Active management allows portfolio teams to dynamically adjust duration, navigate credit quality, and rotate across securitized debt, corporates, and government bonds. The Invesco Total Return Bond ETF (GTO ) is a strong example of this active core approach, offering flexible duration and multisector exposure. “With yields still attractive across high-quality fixed income, investors don’t have to reach aggressively for risk to generate meaningful income,” explained Matt Brill, head of North America investment grade credit at Invesco. “GTO combines a strong investment-grade foundation with the flexibility to allocate across sectors where we see the best relative value. This gives investors the potential to lock in compelling income while relying on active management to navigate changing market conditions.”Less Rate Whiplash, More IncomeBeyond active core allocations, advisors agree with Sanghavi and are leaning heavily into specialized credit sectors to generate yield while insulating portfolios: Floating-Rate Exposure: Strategies like the State Street Bloomberg Investment Grade Floating Rate ETF (FLRN B+) and the Guggenheim Investment Grade CLO ETF (GCLO) adjust coupon payouts alongside interest rate benchmark shifts, offering protection against sticky inflation. Floating-rate bonds were appealing to 35% of advisor respondents. Investment-Grade Corporates: Solid corporate earnings support credit fundamentals, driving strong interest in investment-grade corporate bonds (29%). Year-End Portfolio UpgradesWith year-end approaching, advisors are leveraging tax-loss harvesting in legacy, declining bond positions. For example, the $165 billion Vanguard Total Bond ETF (BND A-) was down 1.6% year-to-date as of October 21. By realizing losses in passive duration-heavy funds, allocators can tax-efficiently upgrade client portfolios into active, floating-rate, and high-quality strategies. For advisors looking to add fixed income exposure using ETFs, there are many approaches and products worthy of consideration. For more news, information, and analysis, visit the Fixed Income Content Hub.