ETFs are gaining traction as a versatile investment vehicle. What makes them potentially a good choice for your clients? Coming up, we offer up some key benefits.

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From Thrivent Asset Management, welcome to Advisor’s Market360^™, a podcast for you, the driven financial advisor.

Exchange traded funds—or as they are more commonly called, ETFs—can play an important role in your clients’ portfolios. But before we go any further, a quick definition may be in order: ETFs are pooled investment vehicles that generally hold a collection of stocks, bonds or other securities—much like mutual funds. And just like mutual funds, ETFs come in many different styles. But there are some key differences between ETFs and mutual funds. To help us sort out those differences, we turned to ETF Capital Markets Specialist, Kyle DeTullio:

DeTullio: “There are several key differences between ETFs and mutual funds. Notably, ETFs offer intraday liquidity. They can be bought and sold anytime during the trading day, whereas mutual funds can only be bought and sold at net asset value after the markets have closed. Another difference is that the way in which ETFs are structured can also lead to greater tax efficiencies compared to similar strategies offered in the mutual fund wrapper. Lastly, ETFs can often also be used to lower cost to clients.”

We asked DeTullio to give us more details about the tax efficiency of ETFs.

DeTullio: “The key to that tax efficiency comes from the way that ETF shares are created and redeemed. Unlike mutual funds, which typically exchange cash for their shares, ETFs take in or deliver out the underlying securities in-kind, in exchange for ETF shares. Now this in-kind creation redemption mechanism can lead to fewer realized gains within the ETF's portfolio, which can translate to lower capital gains distributions for clients.”

We asked DeTullio to explain why ETFs often offer lower fees to investors…

DeTullio: “Most notably, ETFs don't charge sales loads or 12b-1 fees. Additionally, most major brokerages no longer charge commissions on ETF trades, which has further reduced the total cost of ETF ownership.”

Recently, Thrivent Asset Management expanded its suite of ETFs. Our two new offerings are Thrivent Ultra Short Bond ETF and Thrivent Core Plus Bond ETF. We asked DeTullio to give us a high-level overview of Thrivent Ultra Short Bond ETF, ticker TUSB.

DeTullio: “TUSB is specifically managed to seek a high level of current income while preserving capital. This ETF is investing in investment-grade corporate bonds, securitized debt, and US Government bonds. The fund is also keeping its overall duration, generally around one year or less. And allocating to securities with short maturities helps to reduce the interest rate risk and therefore volatility of the fund.”

To learn even more about Thrivent Ultra Short Bond ETF, we talked with its co-managers Cortney Swensen and Andrew Lesser. We asked Swensen why the Ultra Short Bond ETF has the potential to outperform ETFs focused on longer maturity bonds.

Swensen: “Ultra short bond funds have performed better than longer maturity bond funds since the Federal Reserve began raising the Fed Funds rate, which is an overnight rate, in early 2022 in their effort to reduce post-pandemic inflation. Even after the Fed ended its hiking cycle in mid-2023 with the Fed Funds rate at over 5%, ultra short funds performed well due to a persistently inverted yield curve, which is when front end yields are higher than the back end. Looking at a history of returns, there have only been two calendar years since 2006 in which the ultra-short category had negative returns, and both of these were in periods of the Fed rapidly increasing the Fed Funds rate.”

Short duration investments are currently quite popular, we asked Leeser why that’s the case.

Leeser: “The rate environment is the biggest factor driving the popularity of short-duration investments. When yields across the curve are elevated, it produces an attractive income stream for investors. Particularly when the yield curve is inverted, yields at the front end of the curve are even more attractive than longer maturities. Furthermore, a time of heightened macroeconomic uncertainty creates significant volatility in the fixed income markets. A short-duration product will be less sensitive to interest rate volatility and offers stability in the portfolio.”

Also new is Thrivent Core Plus Bond ETF, ticker TCPB. We asked DeTullio to give us an overview:

DeTullio: “TCPB is allocating further out on the curve, with investments in intermediate maturities. It also expands its reach to include high-yield corporate bonds and emerging market debt. This is all in an effort to both generate current income, as well as total return and long-term capital growth.”

This ETF is co-managed by Cortney Swensen and Kent White. We asked Swensen to give us more insight into this ETF’s allocations:

Swensen: “The primary focus of the Core Plus ETF will be high quality, investment-grade-rated bonds, particularly investment-grade corporate bonds and high-quality securitized debt. There will also be an allocation to U.S. Treasuries, the size of which will be dependent on our current views on macroeconomic risk and credit risk.”

The name “Core Plus” was chosen to reflect this ETF’s holdings. We asked White to elaborate.

White: “’Core Plus’ refers to the addition of high-yield corporate and emerging-market debt and a few other asset classes that are not typically in the core bond investment universe. The Core Plus strategy provides flexibility to the portfolio management team to strategically and tactically increase or decrease exposure to different asset classes based on our current views of relative value and risk.”

Many ETFs are passive, meaning they follow a specified index. For example, an ETF can mimic the Nasdaq 100 Index, or even the Bloomberg U.S. Aggregate Bond Index, making the ETF passive. On the other hand, the three ETFs from Thrivent are actively managed. We asked DeTullio why:

DeTullio: “Passive ETFs are designed to follow the structure of a specified index. But actively managed ETFs are not constrained by predetermined rules of an index. Generally, they have a goal of outperforming a specified market index or other benchmark. As such, active ETFs can benefit from the ability to be more dynamic to changing markets. At Thrivent Asset Management, our fund managers are constantly using this research to evaluate portfolio exposures as market conditions change. This oversight helps influence the investments within our actively managed ETFs.”

While Thrivent Asset Management is relatively new to ETFs, it does have an investment management legacy stretching back over 50 years. We asked DeTullio to explain why Thrivent is well positioned to create ETFs. He began by explaining that Thrivent Asset Management has more than 140 investment professionals focused on the stewardship of the $70 billion in clients’ assets, as of December 31, 2024.

DeTullio: “We are investors—not traders—who utilize a team- and proprietary-research-driven approach in our active strategies across asset classes. Active management can be particularly useful in times of volatility and uncertainty—and those are exactly the biggest challenges facing fixed income investors today.”

We wanted to know how TUSB and TCPB might be deployed by investors and financial advisors as part of an overall diversified portfolio. DeTullio had this to say:

DeTullio: “TUSB could also be a good fit for investors looking to reduce duration in their portfolio—at times of heighted macroeconomic uncertainty, much like we have now, shorter-duration products may be less sensitive to interest rate volatility and may offer stability in a portfolio. Our Core Plus Bond ETF, TCPB, on the other hand, may be a better choice for investors who are looking to take on a bit more exposure to interest rates and for the potential of the greater total return over the long-term. For such investors, the flexibility of the portfolio to invest in those high yield and emerging market debt areas may lead to increased income. These ‘plus’ allocations areas really do offer greater diversification, additional opportunities and enhanced ability to be more tactical with portfolio composition. And it’s this flexibility that allows us to be more opportunistic throughout the credit cycle as we seek to outperform. So, TCPB could be a fit for investors who are looking for a product with a potentially higher risk, high reward profile, without getting too far out on the curve.”

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That wraps up this special episode on ETFs. Once again, we would like to thank Kyle DeTullio, Courtney Swensen, Andrew Lesser and Kent White for their insights. What did you think of this episode? Email us at podcast@thriventfunds.com with your feedback or questions for our experts. Want more episodes of Advisors Market360^™ and other market and investing insights? Visit us at thriventfunds.com, where you can learn how we can partner with you, the driven financial advisor. Bye for now.

(Disclosures)

All information and representations herein are as of 4/15/2025 unless otherwise noted.

Past performance is not necessarily indicative of future results.

Investing involves risks, including the possible loss of principal. The prospectus and summary prospectus contain more complete information on the investment objectives, risks, charges and expenses of the fund, and other information, which investors should read and consider carefully before investing. Prospectuses and summary prospectuses are available at thriventETFs.com or by calling 800-521-5308.

The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management, LLC. Actual investment decisions made by Thrivent Asset Management, LLC will not necessarily reflect the views expressed. This information should not be considered investment advice or a recommendation of any particular security, strategy or product. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.

Thrivent Ultra Short Bond ETF and Thrivent Core Plus Bond ETF are newly formed and do not have any operating history. Debt securities may decline in price when interest rates rise and/or issuers are no longer able or willing pay their debt. These and other risks are described in the prospectus.

Any indexes shown are unmanaged and do not reflect the typical costs of investing. Investors cannot invest directly in an index.

The Nasdaq 100 is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange.

The Bloomberg U.S. Aggregate Bond Index is an unmanaged index considered representative of the U.S. investment-grade, fixed-rate bond market.

ALPS Distributors, Inc., member FINRA, is the distributor for Thrivent ETFs. Thrivent Distributors, LLC is the marketing agent and asset management services are provided by Thrivent Asset Management, LLC, an SEC-registered investment adviser. Thrivent Distributors, LLC and Thrivent Asset Management, LLC are subsidiaries of Thrivent, the marketing name for Thrivent Financial for Lutherans.

ALPS Distributors, Inc. is not affiliated with Thrivent or any of its subsidiaries.