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ETF Specialist

Are Strategic-Beta Bond Funds Smart Enough to Protect You in Market Crashes?

Don't count on it.

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Strategic-beta fixed-income funds are often marketed as a better way to invest than market-cap-weighted indexing. Among many features, these newer products typically emphasize their ability to manage risk better than their cap-weighted counterparts.

This article compares the drawdowns of three popular strategic-beta fixed-income funds and replicating portfolios of traditional index funds during three recent acute stress periods. The strategic-beta funds outperformed on only one of the three occasions.

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