How the Largest Bond Funds Did in Q1 2025
Two Pimco funds land as top performers, while a trio of Vanguard index funds struggled.
This article mentions funds that have an issuer-initiated rating and/or track a Morningstar Index. For full disclosure information, please refer to the specific funds, which are demarcated with a * symbol, listed below.
Key Takeaways
- The best performer among the largest active bond funds was the PIMCO Total Return Fund, which returned 3.5% in the first quarter.
- The iShares 20+ Year Treasury Bond ETF did the best out of the largest bond index funds, returning 4.7%.
- TIPS and longer-term bonds outperformed in the quarter, while munis underperformed.
It was a solid quarter for the 10 largest actively managed bond funds, as the group rode gains in the bond market and outperformed the competition during the first three months of 2025. Meanwhile, among the 10 most widely held bond index funds, most also fared well during the quarter, the exception being a trio of Vanguard funds.
Six of the 10 biggest actively managed bond funds ranked in the top 20% of their categories, while none underperformed their category average. Only two of the largest bond index funds ranked in the top quintile of their categories.
Meanwhile, $283 billion Vanguard Growth Index Fund
VIGIX
The broader US investment-grade bond market has held up as the stock market sagged, with the Morningstar US Core Bond Index returning 2.5% in the first quarter. Two areas of particular strength were longer-term Treasuries, with the Morningstar US 10+ Year Treasury Bond Index returning 4%, as longer-term bonds benefit more from falling yields. Rising inflation expectations have helped Treasury inflation-protected securities, with the Morningstar US Treasury Inflation-Protected Securities Index up 3.8%.
Here’s a look at how the largest US bond funds—both actively and passively managed—performed in the first quarter. Performance data for this article was based on the lowest-cost share class for each fund. Some funds may be listed with share classes not accessible to individual investors outside retirement plans. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. For longer-term returns, if a share class was launched more recently than the period mentioned, an older share class was substituted if one exists.
Q1 Performance for the Largest Active Bond Funds
The first quarter was a win for PIMCO, which had the best and second-best funds out of the 10 largest active bond funds based on category rankings. The PIMCO Income Fund PIMIX led the group, landing in the 3rd percentile of the US multisector bond fund category with a 3.3% return. Meanwhile, the $46 billion PIMCO Total Return Fund PTTRX posted a 3.5% return, placing it in the 4th percentile for the intermediate core-plus bond category.
The worst performer of the bunch in terms of both performance relative to its category and total return was the Vanguard Intermediate-Term Tax-Exempt Bond Fund, which returned 0.03% in the quarter. However, the fund was still in the top half of the municipal national intermediate category.
Muni bonds have struggled in 2025, with the Morningstar US Municipal Bond Index down 0.8% in the first quarter.
Q1 Performance for the Largest Passive Bond Funds
The best-performing bond fund by total return was the $53 billion iShares 20+ Year Treasury Bond ETF TLT, which returned 4.7% in the first quarter, putting it in the 30th percentile for the long government category. The yield on 10-year Treasuries has fallen from 4.6% at the beginning of the year to 4.3%. Longer-term bonds are more affected by changes in interest rates. As bond yields fall, their prices rise.
The fund that performed best relative to its category was the $52 billion Vanguard Intermediate-Term Corporate Bond ETF VCIT. Its 2.7% return put it in the 9th percentile of the corporate bond category based on first-quarter returns.
The worst-performing fund was the $101 billion Vanguard Total International Bond Index Fund VTIFX, which fell 0.2% for the quarter. It was also the worst-performing fund relative to its peers, ranking in the 85th percentile of the global bond USD hedged category. It was closely followed by the $127 billion Vanguard Total International Bond II Fund VTILX, which was the only other fund with negative first-quarter returns. It fell 0.1% and ranked in the 83rd percentile of the global bond USD hedged category.
“VTILX excludes bonds from US issuers, which did well this quarter. This is also the case for most other passive funds in the Global Bond-USD Hedged category,” says Lan Ahn Tran, manager research analyst for Morningstar. “However, this category only requires 40% non-US bonds, so a lot of active funds here have a wider scope that includes both international and US bonds. Hence their relative outperformance for this quarter.”
Long-Term Performance of the Largest Active Bond Funds
Seven of the largest active bond funds ranked higher in their categories in the first quarter than they did over the past five years. The biggest difference was in the PIMCO Total Return Fund, which ranked in the 68th percentile of the intermediate core-plus bond category over the past five years but in the 4th percentile in the first quarter.
Long-Term Performance of the Largest Passive Bond Funds
Seven of the largest bond index funds ranked better in the first quarter than they did over the previous five years. (The Vanguard Total International Bond II Index Fund launched in 2021.) The fund with the biggest difference between its longer-term and first-quarter performances was the $59 billion Vanguard Short-Term Bond ETF BSV, which ranked 90th in the short-term bond category over the past five years but in the 16th percentile in the quarter.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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