Passive vs. Active Flows in Bond ETFs

Investors are betting big on bond exchange-traded funds. Hundreds of billions of dollars have poured into bond ETFs in the first nine months of 2025. And more of these strategies have hit the market over the past several years. It’s important to remember that some bond ETFs are riskier than others. What should investors consider before tweaking their portfolio? Dan Sotiroff, a senior manager research analyst at Morningstar Research Services and the editor of the Morningstar ETFInvestor newsletter, discusses that and shares five top ideas for income investors.

Subscribe to Morningstar ETFInvestor for the full list of highly-rated bond ETFs. 

00:00:00 Introduction

00:00:54 Bond ETFs are having a banner year. Why are investors turning to these investments? 

00:02:31 Which is getting the bigger slice: passively or actively managed bond ETFs?

00:03:15 What are the four major types of bond ETFs, and how do they differ?

00:04:35 This month’s edition of Morningstar ETFInvestor analyzed more than a dozen bond ETFs. What makes a core bond ETF a solid portfolio building block?

00:05:47 What’s the top idea that’s received high marks from Morningstar?

00:06:27 We’re shifting from the least risky to the next level up, core-plus. What do these bond ETFs typically offer that an index-tracking ETF does not?

00:07:11 Can you tell us one intermediate core-plus bond ETF that’s earned a Gold rating from Morningstar?

00:07:44 Multisector bond ETFs take on a bit more risk than the previous two categories, and that comes with an expectation of more income. Should income investors skip the others and start here?

00:08:59 It’s time for the third top idea. What multisector bond ETF should folks consider?

00:09:25 High-yield bond ETFs are the riskiest among the categories we’re discussing today. What additional risks are investors taking on for the juicy yields?

00:10:30 Morningstar does not currently rate any actively managed high-yield bond ETFs. Is there one that income investors should watch?

00:11:28 What’s the takeaway for folks figuring out if these types of bond ETFs fit in their portfolios?

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