Most active fixed-income ETFs lag benchmarks in 2025

Most active U.S. fixed-income ETFs underperformed their benchmarks in 2025, with corporate bond strategies showing a 4% active-manager success rate, Morningstar data show. A small number of targeted active ETFs from Nuveen, Invesco and American Century outperformed passive peers.

Morningstar’s active-versus-passive figures for 2025 show 38% of actively managed U.S. mutual funds and ETFs survived and beat their average passive peers over the year, down four percentage points from 2024. Over the decade through 2025, 21% of active U.S. funds both survived and outperformed indexed counterparts. Fixed income had a 10-year success rate of 42% for active managers.

Performance varied by bond sector. Active intermediate-core-bond managers’ success rates fell 26 percentage points to 55% in 2025. Active high-yield managers recorded a 38% success rate. Corporate bond strategies experienced the largest decline, falling 63 percentage points to a 4% success rate.

Morningstar data show many active bond funds held more credit risk than their indexed peers. When credit spreads widened in April 2025 after tariff announcements, many managers reduced credit exposure and did not fully participate in the market rebound in May and June.

Several specialized active ETFs produced positive relative returns by focusing on narrow market segments. Nuveen’s Securitized Income ETF (NSCI) posted a 2.30% year-to-date NAV return through June 2025, compared with a 0.98% return for the Bloomberg U.S. Securitized Bond Index over the same period. NSCI shifted allocations among mortgage-backed securities and collateralized loan obligations.

In ultra-short fixed income, the American Century Multisector Floating Income ETF (FUSI) returned 5.14% over the trailing one-year period, exceeding the 4.12% yield of the Bloomberg U.S. 1–3 Month Treasury Bill Index. Fidelity’s Sustainable High Yield ETF (FSYD) combined ESG screening and focused underwriting to outperform the Bloomberg U.S. Universal Total Return Index. The Invesco Rochester High Yield Municipal ETF (IROC) outperformed the S&P Municipal Bond Index with a high-yield, tax-exempt municipal strategy.

Large asset managers have expanded active fixed-income ETF offerings to give advisers access to targeted strategies. Nuveen has added active fixed-income vehicles aimed at securitized and credit-rich sectors.

Passive funds typically charge lower fees and cover broader market exposures than many active funds. Active bond managers’ greater credit exposure can produce larger gains when spreads tighten and larger declines when spreads widen. In 2025 many active managers reduced credit risk before the market rebound and missed some recoveries that benefited index-based strategies.