This is an actively managed ETF designed to generate high current income by tapping a wide range of opportunities in the mortgage market. It builds its portfolio by combining macroeconomic analysis with detailed analysis of individual assets, and flexibly adjusts its allocations as market conditions change.

It suits income-focused investors who want higher interest income than typical bonds offer and who wish to invest in the diversified return structure of mortgage assets.

Launched in 2021 by Eaton Vance, it is an ETF that follows an active management approach.

The fund invests most of its assets in residential and commercial mortgage-backed securities and asset-backed securities. In particular, it has the flexibility to allocate a portion to high-yield-rated securities for additional return, and it aims to deliver returns above the market average.

• Capturing opportunities across sectors through active management
• A diversified portfolio made up of a variety of securitized assets

Assets under management (AUM) stand at $801.4M, and the expense ratio is 0.45% per year.

While JAAA and PAAA, shown in the table, focus mainly on the top-rated collateralized loan obligation sector, EVMO covers mortgage assets broadly and looks for a wider range of return opportunities.

Even in an environment of high interest rate volatility, the fund has maintained a solid return profile built on stable cash flows. Performance varies by asset type depending on housing market supply and demand and on the interest rate outlook.

As bond yields remain at elevated levels, the income appeal of mortgage assets has come into focus and capital has been flowing in. Investor sentiment tends to be influenced by prepayment risk in the market and by changes in credit spreads.

High income and a diversified portfolio are its strengths, while price volatility from interest rate changes and the prepayment risk inherent in mortgages are factors to consider.

JAAA, PAAA, and CLOA, shown in the table, are options specialized in the securitized sector, while FSEC is an alternative that concentrates on investment-grade securitized assets. If you prefer to focus only on conventional residential mortgages, you could consider passive products such as MBB or VMBS, and if you want a larger share of commercial mortgages, you could look at CMBS. If you want more actively managed broad bond exposure, TOTL is also a good option.

These are the key points to check before investing in EVMO. It is important to build your portfolio only after fully understanding the special structure of mortgage assets and how sensitive their returns are to interest rate changes.

Mortgage securities have a more complex structure than ordinary bonds, and prepayment and delinquency risks tied to interest rate movements can significantly affect performance. In particular, note that the risk of declining asset values can grow during a real estate market downturn.

It is an active product suited to income-oriented investors who want to capture excess returns in the mortgage market through professional management. It is useful as part of the bond allocation from the standpoint of improving long-term returns and diversifying the portfolio.