ETF Education Report: ALLSPRING BROAD MARKET CORE BOND ETF (AFIX)

What this ETF is trying to do

The ALLSPRING BROAD MARKET CORE BOND ETF (AFIX) is an exchange-traded fund that focuses on bond markets. While the specific holdings are not listed in this report, the name suggests it seeks to provide exposure to a broad range of core bonds.

What the numbers show

When looking at an ETF, it is important to understand the difference between "price return" and "total return."

• Price Return: This measures only the change in the share price. For AFIX, the year-to-date (YTD) price return is approximately -6.02%. The one-year price return is approximately -6.90%.

• Total Return: This includes both the share price changes and any cash distributions paid out to investors. The YTD total return is approximately -2.86%, and the one-year total return is approximately -2.17%.

Because the total return numbers are higher than the price return numbers, it shows that the cash distributions helped offset some of the share-price decline.

To visualize this, we can look at an estimated price from roughly one year ago. The price was approximately $25.33, and the current price is $23.59.

Income and distribution explanation

Some investors look at ETFs for regular cash payments, known as distributions. AFIX has a distribution yield of approximately 5.24%. This means the amount of cash distributed is about 5.24% of the current share price.

The ETF usually pays these distributions monthly, with 13 distributions recorded over the last year. It is important to remember that a high distribution yield does not guarantee an investor will earn that same percentage as a total return.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. While a falling share price does not always mean the NAV is dropping, we can look at "erosion-risk" measurements to see how the price is behaving.

AFIX has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk rather than a confirmed collapse of value. There is no severe erosion-risk flag for this ETF.

Pros

• The ETF provides regular cash distributions (usually monthly).

• The total return is higher than the price return, meaning distributions are helping to cushion the impact of falling share prices.

Cons

• The ETF has experienced a share-price decline over the last year.

• The erosion-risk score indicates "mild price erosion."

Beginner takeaway

When studying AFIX, it is helpful to distinguish between the price of a share and the total return. While the share price has gone down, the cash distributions provided to investors have helped make the total return less negative. Always remember that high yields can exist even when share prices are falling.