An Active Approach to Target Maturity

Investors have been embracing actively managed fixed income ETFs in 2024. So it is not surprising that the category is an area of focus for product development. The latest suite of active ETFs to catch my eye are from State Street Global Advisors.

The top-tier ETF provider launched 14 target maturity fixed income ETFs in September as part of a broader product expansion. Nine of these invest in corporate bonds that mature in individual years between 2026 and 2034. The remaining five own municipal bonds with vintages of 2026-2030.

Target maturity bond ETFs have been around for years from Invesco and iShares. Indeed, they are quite popular. For example, the Invesco BulletShares 2026 Corporate Bond ETF (BSCQ) and the iShares iBonds Dec 2026 Term Corporate Bond ETF (IBDR) manage $3.8 billion and $2.9 billion, respectively. They both launched in 2016 and take an index-based approach. Both Invesco and iShares have a broad suite of popular target maturity ETFs.

Diversification is a key appeal of these funds. IBDR holds more than 650 bonds, while BSCQ holds over 450. The credit risks are reduced by spreading assets across issuers and sectors.

“Building a bond ladder by investing in target maturity ETFs is potentially helpful for retirees seeking predictability as they plan for the next chapter of their retirement years, without having to manage a portfolio of individual bonds,” said Anna Paglia, chief business officer for State Street Global Advisors.