Take a Fresh Approach to the ‘Agg’ With This Bond ETF

Broadly speaking, bonds frustrated investors in the first quarter, but that may be all the impetus some advisors and fixed income investors need to consider alternatives to traditional passive aggregate bond funds. Enter MUSI, the American Century Multisector Income ETF. The American Century bond ETF, which turns five years old in June, is actively managed and attempts to beat the widely followed Bloomberg U.S. Aggregate Bond Index. MUSI highlights the advantages of the active management/fixed income union as highlighted by an average effective duration of 5.73 years. This puts it in intermediate-term territory — the duration segment historically least correlated to equities. That’s potentially advantageous at a time when longer-dated bonds may not offer the protection investors are looking for. “With war in the Middle East causing elevated energy prices, inflation worries have come to the fore again in 2026, and long-term bond prices may well remain volatile,” noted Christine Benz of Morningstar. “That suggests investors with near-term spending needs, including retirees who are actively drawing on their portfolios, should hold cash and short-term bonds alongside their core intermediate- or long-term fixed-income holdings.”

MUSI Could Boost Bond Returns

A problem some advisors and investors encounter with standard passive aggregate bond ETFs is that their return profiles are largely levered to Treasuries and agency-backed debt. That’s fine for risk-averse market participants and those that want exposure to the highest-quality debt, but that way of doing thing can weigh on long-term income and returns. “With yields ultralow for much of the past decade, bond returns have generally been meager. Through the end of December 2025, the Morningstar US Core Bond Index had logged an annualized return just shy of 2%,” added Benz. “While bond prices suffered painful declines as the Federal Reserve began to increase interest rates to combat inflation in 2022, those higher yields have translated into better returns for bond investors, as well as better downside protection.” MUSI has the potential to reward fixed income investors that are willing to accept slightly more risk. The bond ETF allocates a combined 44% of its weight to high-yield and investment-grade corporate debt — a high percentage relative to competing passive strategies. That’s not to say the ETF is “high risk.” It’s not. MUSI directs nearly 13% of its portfolio to U.S. government bonds and approximately 22% to debt rated AAA, AA or A. Home to 377 bonds, MUSI charges 0.38% per year, or $38 on a $10,000 investment.