This is an actively managed bond ETF that places most of its assets in US mortgage-backed securities (MBS). It holds both agency MBS and non-agency mortgage debt, and the management team uses its discretion to adjust credit and maturity exposure in pursuit of income.

It suits investors who want bond-style income and who seek additional returns from the non-agency segment beyond passive MBS exposure.

The ETF is run with an active management approach by Angel Oak Capital Advisors.

Most of the assets are invested in US mortgage-backed securities, and the fund diversifies its sources of return by holding both agency MBS and non-agency mortgage debt. The managers actively select holdings based on issuer, credit rating, maturity and yield. The share of below-investment-grade assets is capped at a set limit, and in volatile markets the fund can also make defensive adjustments by raising its allocation to short-term, high-quality assets.

• Active selection that combines agency and non-agency MBS
• An income-oriented structure built on monthly dividends

Assets under management (AUM) stand at $192.5M, and the total expense ratio is 0.49% per year.

Its fees are somewhat higher than those of the passive MBS ETFs MBB and VMBS, but it differs by actively selecting securities even in the non-agency segment.

As an MBS bond ETF, its price movement is driven by the direction of market interest rates and mortgage spreads, and accumulated interest income, rather than short-term swings, has tended to be the core of its performance. When rates move, duration and credit spread effects appear together.

Fund flows vary with demand for bond income and changes in the interest rate environment. In general, money tends to flow into bond assets when expectations of rate cuts grow, but because of its non-agency exposure, differences linked to the credit environment may also emerge.

Its income strategy of actively selecting even non-agency MBS is its strength, while the fee burden of the active structure and credit and interest rate risks are its drawbacks.

The three tickers shown in the table, MBB, VMBS and SPMB, are lower-fee passive alternatives in the same MBS category and focus mainly on agency MBS. If you also want active management, active MBS ETFs such as JMBS and JMTG are candidates for comparison, and if you want to broaden your exposure across the bond market, the broad aggregate bond ETFs BND and AGG are also worth considering.

These are the points to review before investing in MBS. Because this is an active bond ETF, it is important to check the fee level, non-agency credit exposure and interest rate sensitivity in advance, and it is also wise to look at the cost and structural differences versus passive MBS ETFs.

Credit risk in non-agency MBS, along with changes in interest rates and prepayments, is the main driver of price and yield fluctuations. Although it is a bond fund, short-term losses can occur when the credit environment deteriorates.

It is a suitable choice for investors who want active income beyond passive agency MBS exposure. If cost is the priority, MBB and VMBS are the candidates, and if you want active selection and non-agency exposure, MBS becomes the one to consider.