Raising the Bar for Active Bond Managers
There's more than meets the eye when assessing bond funds' performance.
A version of this article appeared in the August 2018 issue of Morningstar ETFInvestor. Download a complimentary copy of Morningstar ETFInvestor by visiting the website.
Active managers in the intermediate-term bond Morningstar Category have fared much better against their category index over the past decade than their counterparts in most U.S. equity categories. That’s largely because the category benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, does not adequately represent the depth and breadth of the pond where active managers in this category fish. The index skews heavily toward low-yielding U.S. Treasuries and agency mortgage-backed securities, which have little credit risk.