Though passive bond funds still tend to do better than active, that is not true across the board. Around 30% of active short & intermediate corporate bond funds, and almost 40% of international bond funds, beat their respective indices over the last 15 years (and the scorecard does not say by what margins). I don't know enough to say why that is, nor can I say which funds will continue to do so in the future, but there does seem to be noticeable alpha in bond markets, and those sectors in particular.GoFish wrote: ↑Mon Feb 10, 2020 2:22 amUntil I learn differently, I will continue to think paying for active management in bond funds makes sense. I have significant positions in these active funds in my FIDO TIRA:
Along with SHY (15 bp, 9%) those active funds make up the bulk of my fixed income investments.
- FTBFX (45 bp, 10% of portfolio)
- PIMIX (105 bp, 6%)
- BCOIX (30 bp, 9%)
To respond to the OP, PIMIX is my most expensive fund at 1.05%. I could choose any fund FIDO offers, so I guess I have volunteered for an expense ratio over 1%
But PIMIX has significantly outperformed my other fixed income holdings, so I’m not anxious to unload it.
I have back tested each of the active funds against VBTLX (5 bp). With only the exception of the last 12 months where PIMIX has lagged slightly, each of the active funds has outperformed VBTLX over 1, 3, 5, and 10 years.
I don’t get the BH preference for index funds for fixed income. But I’m here to learn.
That said, I still own passive bond funds because even if managers are able to pick bonds, I am not confident in my ability to pick managers.