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Intermediate-Term Bond Index Beaters

Our series takes a look at actively managed core bond funds that beat a market proxy.

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Up to now our Index Beaters series has focused on equity-fund categories in an effort to identify those actively managed funds that have outperformed indexes during medium (five-year) and long (10-year) periods. Previous installments focused on foreignmid-cap, and large-cap equity funds. This week we turn to fixed income and a category that has enjoyed huge asset inflows during the past year: intermediate-term bond.

Morningstar defines intermediate-term bond funds as those with portfolios of investment-grade U.S. issues, typically with durations (a measure of interest-rate sensitivity) of 3.5 to 6.0 years. During the past year, investors have continued to plow money into bond funds while turning away from stocks, and no fund category has seen more inflows than intermediate-term bond, with $106.7 billion added in the 12-month period ended Sept. 30. To put that into perspective, consider that intermediate bond, at $1.06 trillion, is the second-largest mutual fund category by net assets (behind only large-blend stock), and that about 10% of those net assets were added in just the past year.

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Adam Zoll does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.