Are Actively Managed Bond Funds Worth a Look?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
LMK5
Posts: 334
Joined: Sat Jan 05, 2008 8:43 pm
Location: Orange County, CA

Are Actively Managed Bond Funds Worth a Look?

Post by LMK5 »

Stock index funds have certainly proven their mettle over time, but how about bond index funds? Is it worth investing in an actively managed fund that may hold a portion of the portfolio securities in junk bonds or other instruments? Most of the time these funds seem to outperform their more conservative index brethren, albeit at a higher expense ratio. With the higher expense ratios, lower credit quality, and the assumption of greater volatility, is it still worthwhile, on a risk adjusted basis, to own these funds instead of or as a complement to bond index funds?
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

LMK5 wrote: Thu Apr 29, 2021 5:28 pm Stock index funds have certainly proven their mettle over time, but how about bond index funds?
Bond index funds have also proven their mettle.
LMK5 wrote: Thu Apr 29, 2021 5:28 pmIs it worth investing in an actively managed fund that may hold a portion of the portfolio securities in junk bonds or other instruments?
Only if you're worried that you might retire with too much money if you don't invest in actively managed funds.

Joking aside, there's no evidence that bond fund managers are any more effective at delivering outperformance to investors than stock fund managers.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
User avatar
watchnerd
Posts: 8318
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Are Actively Managed Bond Funds Worth a Look?

Post by watchnerd »

LMK5 wrote: Thu Apr 29, 2021 5:28 pm Stock index funds have certainly proven their mettle over time, but how about bond index funds? Is it worth investing in an actively managed fund that may hold a portion of the portfolio securities in junk bonds or other instruments? Most of the time these funds seem to outperform their more conservative index brethren, albeit at a higher expense ratio. With the higher expense ratios, lower credit quality, and the assumption of greater volatility, is it still worthwhile, on a risk adjusted basis, to own these funds instead of or as a complement to bond index funds?
I don't think there is a good case for it for any of the bond types you mentioned.

I will intellectually allow that positive alpha might be possible with emerging market bonds.

VEGBX has done well vs VWOB -- but that could also just be a statistical fluke.

It's a 20 bps difference between the two, so not a horrible cost difference if the manager magic goes away.
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
Makefile
Posts: 717
Joined: Fri Apr 22, 2016 11:03 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by Makefile »

Interestingly, John Bogle also came up with the idea of defined-maturity bond funds (short, intermediate, long). Arguably this is even more widely accepted and adopted across the industry than indexing. Before those kinds of funds, part of actively managing a bond fund was adjusting the maturity in response to market conditions.
Topic Author
LMK5
Posts: 334
Joined: Sat Jan 05, 2008 8:43 pm
Location: Orange County, CA

Re: Are Actively Managed Bond Funds Worth a Look?

Post by LMK5 »

Makefile wrote: Thu Apr 29, 2021 5:59 pm Interestingly, John Bogle also came up with the idea of defined-maturity bond funds (short, intermediate, long). Arguably this is even more widely accepted and adopted across the industry than indexing. Before those kinds of funds, part of actively managing a bond fund was adjusting the maturity in response to market conditions.
Curious as to what makes you say that defined maturity bond funds are popular. I know Guggenheim sells them but it seems they're not very popular. Do Vanguard or Fidelity offer them?
User avatar
abuss368
Posts: 24710
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Are Actively Managed Bond Funds Worth a Look?

Post by abuss368 »

LMK5 wrote: Thu Apr 29, 2021 5:28 pm Stock index funds have certainly proven their mettle over time, but how about bond index funds? Is it worth investing in an actively managed fund that may hold a portion of the portfolio securities in junk bonds or other instruments? Most of the time these funds seem to outperform their more conservative index brethren, albeit at a higher expense ratio. With the higher expense ratios, lower credit quality, and the assumption of greater volatility, is it still worthwhile, on a risk adjusted basis, to own these funds instead of or as a complement to bond index funds?
In my opinion any short or intermediate term investment grade bond fund that is low cost and diversified will provide safety and income to a portfolio.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
okwriter
Posts: 28
Joined: Mon Apr 12, 2021 2:00 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by okwriter »

Charles Schwab had an actively managed ultrashort bond fund that lost 42% in 2008-09.

https://www.cbsnews.com/news/lessons-fr ... s-debacle/
In May 2007, Morningstar's analysis of YieldPlus carried the headline "YieldPlus a Solid Alternative to Cash."

In November, they wrote that they were "guardedly optimistic about [the fund's] prospects."

Just nine months later, with the fund sporting a 31 percent loss, Morningstar's optimism was exhausted, and they accurately called the fund "an unmitigated disaster."
User avatar
rob
Posts: 3558
Joined: Mon Feb 19, 2007 6:49 pm
Location: Here

Re: Are Actively Managed Bond Funds Worth a Look?

Post by rob »

No - The managers of bonds funds have no better record at beating the market... just the swings are usually less than their stock cousins.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
BJJ_GUY
Posts: 633
Joined: Wed Mar 13, 2019 7:45 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by BJJ_GUY »

rob wrote: Thu Apr 29, 2021 8:23 pm No - The managers of bonds funds have no better record at beating the market... just the swings are usually less than their stock cousins.
Are you sure about that statement? I studies show that an inordinate % of active bond funds beat there benchmark, and definitely more than active equity mutual funds. Of course, I've also seen studies where it was pretty easy to explain the outperformance by taking on more credit risk, and often times just investing in instruments not in the benchmark etc. I think it's easier to game the bond indices (which are super-flawed themselves, so it's no wonder).
Buy_N_Hold
Posts: 98
Joined: Wed Aug 12, 2020 10:58 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by Buy_N_Hold »

okwriter wrote: Thu Apr 29, 2021 8:12 pm Charles Schwab had an actively managed ultrashort bond fund that lost 42% in 2008-09.

https://www.cbsnews.com/news/lessons-fr ... s-debacle/
In May 2007, Morningstar's analysis of YieldPlus carried the headline "YieldPlus a Solid Alternative to Cash."

In November, they wrote that they were "guardedly optimistic about [the fund's] prospects."

Just nine months later, with the fund sporting a 31 percent loss, Morningstar's optimism was exhausted, and they accurately called the fund "an unmitigated disaster."
Fascinating article. I’m guessing they were ultra-exposed to sub-prime. Thanks for sharing.
“To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.” -Edgar Bronfman
thenextguy
Posts: 517
Joined: Wed Mar 25, 2009 12:58 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by thenextguy »

I really don’t know, but the bond markets are enormous. I’d imagine they’re pretty efficient.

However, the only bond fund in my retirement plan is DODIX and it’s beaten Vanguard Total Bond fund since inception (1989) with a higher Sharpe ratio. I know there’s always some funds the beat the benchmark, but I was surprised when I saw the performance over that length of time.
User avatar
watchnerd
Posts: 8318
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Are Actively Managed Bond Funds Worth a Look?

Post by watchnerd »

thenextguy wrote: Thu Apr 29, 2021 9:43 pm I really don’t know, but the bond markets are enormous. I’d imagine they’re pretty efficient.

However, the only bond fund in my retirement plan is DODIX and it’s beaten Vanguard Total Bond fund since inception (1989) with a higher Sharpe ratio. I know there’s always some funds the beat the benchmark, but I was surprised when I saw the performance over that length of time.
I think the bond markets are extremely efficient when it comes to Treasuries, which are basically commodities.

After that, though, I'm not so sure.

I have a b-school friend who went to go work for one of the big investment banks in their muni bond business and he told a lot of stories about all the fudge factors that went in to setting credit rating and yield when it came to bringing the bonds to market. Credit ratings for the same risk level could change from the prior issues depending on what the bankers thought the market wanted that year....did the market want something a little higher yield, with a hair more risk? Or was the market in a cautious mood this year?
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
User avatar
grabiner
Advisory Board
Posts: 29691
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Are Actively Managed Bond Funds Worth a Look?

Post by grabiner »

BJJ_GUY wrote: Thu Apr 29, 2021 8:40 pm
rob wrote: Thu Apr 29, 2021 8:23 pm No - The managers of bonds funds have no better record at beating the market... just the swings are usually less than their stock cousins.
Are you sure about that statement? I studies show that an inordinate % of active bond funds beat there benchmark, and definitely more than active equity mutual funds.
This is often because the benchmark is wrong. Most active general bond funds hold less in Treasuries than the bond indexes. When corporate bonds outperform Treasuries, active funds beat the index. When Treasuries outperform corporates, the index comes out well ahead, and this tends to be the time you most need risk reduction from your bonds (such as October 2008 and March 2020).

But it's actually less likely that a high-expense bond fund will beat a proper benchmark than that a stock fund will beat the benchmark, because there is less variability. It is much easier for a large-cap stock fund to beat a large-cap stock index by 1% before expenses (or to lose by an equal amount) than for an intermediate-term corporate bond fund to beat an intermediate-term corporate index.

The key is not active versus index, but high expense versus low expense. Vanguard's active bond funds have expenses comparable to its index funds, so they should beat an appropriate index fund or benchmark half the time.
Wiki David Grabiner
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

LMK5 wrote: Thu Apr 29, 2021 7:44 pm
Makefile wrote: Thu Apr 29, 2021 5:59 pm Interestingly, John Bogle also came up with the idea of defined-maturity bond funds (short, intermediate, long). Arguably this is even more widely accepted and adopted across the industry than indexing. Before those kinds of funds, part of actively managing a bond fund was adjusting the maturity in response to market conditions.
Curious as to what makes you say that defined maturity bond funds are popular. I know Guggenheim sells them but it seems they're not very popular. Do Vanguard or Fidelity offer them?
A "defined maturity" fund is, confusingly, different from a "target maturity" fund.

A "defined maturity" fund owns bonds with a certain range of maturities (say, 5 to 10 years), selling them when they reach 5 years to maturity and buying 10 year bonds to replace them. Example would be Vanguard Intermediate-Term Bond Index Fund (VBILX).

A "target maturity" fund owns bonds that mature in a particular year (e.g. 2025). Example would be iShares® iBonds® Dec 2025 Term Treasury ETF (IBTF).
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

grabiner wrote: Thu Apr 29, 2021 10:03 pm
BJJ_GUY wrote: Thu Apr 29, 2021 8:40 pm
rob wrote: Thu Apr 29, 2021 8:23 pm No - The managers of bonds funds have no better record at beating the market... just the swings are usually less than their stock cousins.
Are you sure about that statement? I studies show that an inordinate % of active bond funds beat there benchmark, and definitely more than active equity mutual funds.
This is often because the benchmark is wrong. Most active general bond funds hold less in Treasuries than the bond indexes. When corporate bonds outperform Treasuries, active funds beat the index. When Treasuries outperform corporates, the index comes out well ahead, and this tends to be the time you most need risk reduction from your bonds (such as October 2008 and March 2020).
I was about to post a similar comment.

When active bond funds "beat" their benchmark, they generally do so by taking more risk. This can be credit risk or term risk, but either way it's not really excess return: if an investor wants more risk, there are plenty of bond index funds that can provide the same risk/return at lower cost.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
000
Posts: 4857
Joined: Thu Jul 23, 2020 12:04 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by 000 »

I think so. Ignore the noise from people blathering about the average active fund. You get to pick the fund and fund family so the average doesn't matter. Specifically, most of Vanguard's active bond funds are of sufficiently low cost to be worthy of consideration.

The argument for indexing bonds at all is very weak because they have a fixed upside (no danger akin to missing a stock which goes to the moon). The argument for indexing illiquid securities like corporate bonds is even worse as these markets don't have enough price discovery.
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

watchnerd wrote: Thu Apr 29, 2021 10:00 pm I think the bond markets are extremely efficient when it comes to Treasuries, which are basically commodities.

After that, though, I'm not so sure.
Bond markets are more than efficient enough to prevent active bond fund managers from being able to consistently deliver excess returns to shareholders.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
User avatar
watchnerd
Posts: 8318
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Are Actively Managed Bond Funds Worth a Look?

Post by watchnerd »

vineviz wrote: Thu Apr 29, 2021 10:58 pm
watchnerd wrote: Thu Apr 29, 2021 10:00 pm I think the bond markets are extremely efficient when it comes to Treasuries, which are basically commodities.

After that, though, I'm not so sure.
Bond markets are more than efficient enough to prevent active bond fund managers from being able to consistently deliver excess returns to shareholders.

I said nothing about managers or funds at all or whether they beat indices.

You're addressing something I didn't even talk about.

Perhaps you didn't read my comment about munis and what that might imply for inefficiencies in the market.

That is not a commentary on whether that inefficiency is exploitable.
Last edited by watchnerd on Thu Apr 29, 2021 11:11 pm, edited 1 time in total.
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

watchnerd wrote: Thu Apr 29, 2021 11:06 pm
vineviz wrote: Thu Apr 29, 2021 10:58 pm
watchnerd wrote: Thu Apr 29, 2021 10:00 pm I think the bond markets are extremely efficient when it comes to Treasuries, which are basically commodities.

After that, though, I'm not so sure.
Bond markets are more than efficient enough to prevent active bond fund managers from being able to consistently deliver excess returns to shareholders.

I said nothing about managers or funds at all or whether they beat indices.

Perhaps you didn't read my comment about munis and what that might imply for inefficiencies in the market.
I read the comment, but there are no implications for inefficiencies there.

As I said, bond markets are plenty efficient enough to render the answer to the OP's question ("Are Actively Managed Bond Funds Worth a Look?") an emphatic "no".
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
User avatar
watchnerd
Posts: 8318
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Are Actively Managed Bond Funds Worth a Look?

Post by watchnerd »

vineviz wrote: Thu Apr 29, 2021 11:11 pm

I read the comment, but there are no implications for inefficiencies there.

As I said, bond markets are plenty efficient to render the answer to the OP's question ("Are Actively Managed Bond Funds Worth a Look?") an emphatic "no".
How are there not implications for inefficiencies if the investment banks are gaming credit ratings to win deals with municipalities?

I'm not making a comment on funds at all.
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

watchnerd wrote: Thu Apr 29, 2021 11:13 pm How are there not implications for inefficiencies if the investment banks are gaming credit ratings to win deals with municipalities?
Because the relationship between bond issuers and bond rating agencies isn't a secret. Even casual purchasers of municipal bonds know the deal.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
User avatar
watchnerd
Posts: 8318
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Are Actively Managed Bond Funds Worth a Look?

Post by watchnerd »

vineviz wrote: Thu Apr 29, 2021 11:28 pm
watchnerd wrote: Thu Apr 29, 2021 11:13 pm How are there not implications for inefficiencies if the investment banks are gaming credit ratings to win deals with municipalities?
Because the relationship between bond issuers and bond rating agencies isn't a secret. Even casual purchasers of municipal bonds know the deal.
Well if you consider the kind of collusive relationship between ratings agencies and investment banks, the very type of thing that was one of the issues underlying the Great Financial Crisis, a case of not just lack of information but actual disinformation, to be indicative of an efficient market, I don't know why we bother to have regulatory agencies at all.

We could just say everyone knows it's corrupt and that's already priced in. :oops:

That sounds like *exactly* the kind of cronyism that people say make emerging markets *inefficient.*
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

watchnerd wrote: Thu Apr 29, 2021 11:35 pm That sounds like *exactly* the kind of cronyism that people say make emerging markets *inefficient.*
People say all sorts of things.

To be clear, I'm not saying that collusion makes markets efficient only that collusion doesn't necessarily make them INefficient.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
User avatar
nisiprius
Advisory Board
Posts: 43360
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Are Actively Managed Bond Funds Worth a Look?

Post by nisiprius »

The situation I've typically found is much the same as with stock funds: many actively managed funds, certainly the ones that are likely to come to our attention, are funds that have beaten their index and outperformed comparable index funds. The outperformance is small but real, but almost invariably they are taking higher risk, and the risk counterbalances at least some of the outperformance. The thing is that outperformance is very visible--and shows up in the 1-3-5-10-year return numbers and makes them pop up out if you look at a table and run down the columns. The risk, if it's a small amount, is almost invisible to the eye. Whatever regulations dictate what goes into the factsheets and fund summaries doesn't require any numerical disclosure of risk. It's not hard to find for those of us who know our way around the Morningstar website or PortfolioVisualizer.

The big question you need to ask about bond funds is: if you have a "normal" retirement savings portfolio with, say, 60% stocks or more, and if you restrict yourself to normal "core" bond funds whose purpose is have intrinsically lower risk than stocks--investment-grade bonds, and a duration that is intermediate term--how much difference do different choices of bond fund make in the behavior of your portfolio as a whole?

"Sure, they're worth a look, why not?" I don't think they are likely to improve things much, but there isn't much risk involved, either. Offhand I've only been aware of one true disaster, in anything that is an normal "core" bond fund. This is one that was made available in 401(k) plans, I mean it was supposed to be a plain vanilla mainstream fund. Blue, the Oppenheimer (now Invesco) Core Bond Fund, OPIGX; orange, Vanguard Total Bond (but virtually any other mainstream vanilla bond fund was similar).

Source

Image

But mostly it is just not a consequential decision. You're not taking much risk by going active, other than the risk of kidding yourself by seeing the outperformance and not seeing the risk.

The big decision, the one that is consequential, is which of three paths to take:

1) A "core" bond portfolio that damps down portfolio risk by the reliable, brute-force method of not being very risky itself (intermediate term, investment-grade, no special focus on Treasury securities)

2) A bond portfolio that is risky enough for its dynamic behavior relative to stocks to matter. That is, make a point of specifically including long-term Treasuries in hopes of erasing stock risk through negative correlation. Or leverage. Or high-yield bonds, particular those that reach deeply into lower-grade issues.

3) 100% stocks
Last edited by nisiprius on Fri Apr 30, 2021 7:24 am, edited 2 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
nisiprius
Advisory Board
Posts: 43360
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Are Actively Managed Bond Funds Worth a Look?

Post by nisiprius »

I do think anyone considering in active bond funds should be aware of what happened with Bill Gross. He was once lionized as the "bond king" and pre-eminent active manager. For thirty years, his PIMCO Total Return fund outperformed Vanguard Total Bond--possibly in every single year but 2011? without visible evidence of more risk. Within this forum, he was one of those gurus people quoted as absolute truth--"do this or don't do that because Bill Gross says...."

In 2014 he left PIMCO and jointed Janus, where he was set free to use his full abilities to pick any bonds in the world he wanted, unconstrained by having to stay within the tame and timid bounds of a "core" bond fund.

The time period shown is the time period when he was managing it, and it had the name "Janus [Henderson] Global Unconstrained Bond Fund," JUCIX. If your interpretation is that Bill Gross once had skill and suddenly lost it, in a way that's the point. If you go in for an actively managed fund, you somehow have to constantly be judging whether or not the manager is retaining his skill.

Blue: Bill Gross' actively managed "global" bond fund. Orange: (US) bond index fund. Green: International bond index fund.

Source

Image

It is quite possible that indexing is not the optimum bond strategy, but it is well within the range of the reasonable. Active management can go wrong, even in the hands of a champion active manager.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Topic Author
LMK5
Posts: 334
Joined: Sat Jan 05, 2008 8:43 pm
Location: Orange County, CA

Re: Are Actively Managed Bond Funds Worth a Look?

Post by LMK5 »

nisiprius wrote: Fri Apr 30, 2021 7:20 am I do think anyone considering in active bond funds should be aware of what happened with Bill Gross. He was once lionized as the "bond king" and pre-eminent active manager. For thirty years, his PIMCO Total Return fund outperformed Vanguard Total Bond--possibly in every single year but 2011? without visible evidence of more risk. Within this forum, he was one of those gurus people quoted as absolute truth--"do this or don't do that because Bill Gross says...."

In 2014 he left PIMCO and jointed Janus, where he was set free to use his full abilities to pick any bonds in the world he wanted, unconstrained by having to stay within the tame and timid bounds of a "core" bond fund.

The time period shown is the time period when he was managing it, and it had the name "Janus [Henderson] Global Unconstrained Bond Fund," JUCIX. If your interpretation is that Bill Gross once had skill and suddenly lost it, in a way that's the point. If you go in for an actively managed fund, you somehow have to constantly be judging whether or not the manager is retaining his skill.

Blue: Bill Gross' actively managed "global" bond fund. Orange: (US) bond index fund. Green: International bond index fund.

Source

Image

It is quite possible that indexing is not the optimum bond strategy, but it is well within the range of the reasonable. Active management can go wrong, even in the hands of a champion active manager.
Thanks for the great posts. Question: Does your chart show price history or total return (with reinvested dividends)? I have found that, unfortunately, most charting programs show price history for bond funds and you have to dig somewhere else for total return.

What I have found is that, at least for non-Vanguard bond funds, the expense ratio for the actively-managed funds is 0.2-0.4% higher than comparable index funds from the same provider. So the first big hurdle--all other things being equal--is to overcome that differential. It seems to me that, especially in a low interest rate environment like we have currently, overcoming the expense ratio penalty is quite a tall order. The active manager must increase the risk of his/her portfolio from the very start just to stay even with the index fund. But to then add performance, my guess is that they must add even more risk, whether through credit risk, duration risk, or in the trading of derivatives or other products. This increase in risk must make itself known in some way, shape, or form.

I know from my own experience with high yield bond funds that when things are "normal" they do outperform, but when things go sideways they start acting like stocks! If you weren't previously aware of the risk you were assuming, it becomes quite apparent.
User avatar
jeffyscott
Posts: 9602
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: Are Actively Managed Bond Funds Worth a Look?

Post by jeffyscott »

watchnerd wrote: Thu Apr 29, 2021 10:00 pm
thenextguy wrote: Thu Apr 29, 2021 9:43 pm I really don’t know, but the bond markets are enormous. I’d imagine they’re pretty efficient.

However, the only bond fund in my retirement plan is DODIX and it’s beaten Vanguard Total Bond fund since inception (1989) with a higher Sharpe ratio. I know there’s always some funds the beat the benchmark, but I was surprised when I saw the performance over that length of time.
I think the bond markets are extremely efficient when it comes to Treasuries, which are basically commodities.

After that, though, I'm not so sure.

I have a b-school friend who went to go work for one of the big investment banks in their muni bond business and he told a lot of stories about all the fudge factors that went in to setting credit rating and yield when it came to bringing the bonds to market. Credit ratings for the same risk level could change from the prior issues depending on what the bankers thought the market wanted that year....did the market want something a little higher yield, with a hair more risk? Or was the market in a cautious mood this year?
Aside from treasuries, I think the bond market is generally recognized to be less efficient than the stock market.
https://www.morningstar.com/articles/92 ... ing-ground

But is it inefficient enough to offset the cost of running a managed fund?
https://www.morningstar.com/articles/1011344/article

I use CDs in place of treasuries for their higher yields and low cost managed bond funds for (primarily) non-treasury bonds. If the fund managers prove to not be worth their cost, at least that'll be offset by the higher yields from the CDs.
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
User avatar
nisiprius
Advisory Board
Posts: 43360
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Are Actively Managed Bond Funds Worth a Look?

Post by nisiprius »

LMK5 wrote: Fri Apr 30, 2021 9:24 am
...Blue: Bill Gross' actively managed "global" bond fund. Orange: (US) bond index fund. Green: International bond index fund.

Source

Image
Thanks for the great posts. Question: Does your chart show price history or total return (with reinvested dividends)? I have found that, unfortunately, most charting programs show price history for bond funds and you have to dig somewhere else for total return.
If you click on the "source" link, you'll see that this is described as "growth." Charts that are described as "growth," or "hypothetical growth of $10,000," or "hypothetical growth of $10,000," and that start at exactly $10,000 at the left end are total return.

I agree with you completely. Growth charts are what matter, price charts are what they usually show you.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Topic Author
LMK5
Posts: 334
Joined: Sat Jan 05, 2008 8:43 pm
Location: Orange County, CA

Re: Are Actively Managed Bond Funds Worth a Look?

Post by LMK5 »

nisiprius wrote: Fri Apr 30, 2021 11:34 am
LMK5 wrote: Fri Apr 30, 2021 9:24 am
...Blue: Bill Gross' actively managed "global" bond fund. Orange: (US) bond index fund. Green: International bond index fund.

Source

Image
Thanks for the great posts. Question: Does your chart show price history or total return (with reinvested dividends)? I have found that, unfortunately, most charting programs show price history for bond funds and you have to dig somewhere else for total return.
If you click on the "source" link, you'll see that this is described as "growth." Charts that are described as "growth," or "hypothetical growth of $10,000," or "hypothetical growth of $10,000," and that start at exactly $10,000 at the left end are total return.

I agree with you completely. Growth charts are what matter, price charts are what they usually show you.
Got it.
000
Posts: 4857
Joined: Thu Jul 23, 2020 12:04 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by 000 »

nisiprius wrote: Fri Apr 30, 2021 7:09 am the Oppenheimer (now Invesco) Core Bond Fund, OPIGX
Why do people always make comparisons to expensive active funds instead of Vanguard's low cost active bond funds?

Would it be fair to argue against S&P 500 indexing because of S&P 500 index funds charging 2% ER?
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

000 wrote: Fri Apr 30, 2021 4:32 pm
nisiprius wrote: Fri Apr 30, 2021 7:09 am the Oppenheimer (now Invesco) Core Bond Fund, OPIGX
Why do people always make comparisons to expensive active funds instead of Vanguard's low cost active bond funds?

Would it be fair to argue against S&P 500 indexing because of S&P 500 index funds charging 2% ER?
I can't speak for nisiprius, but it looks to me like the use of OPIGX was simply to illustrate a point they were making.

But more broadly, the only advantage a low cost active bond fund has for the investor over a high cost active bond fund is that the investor is overpaying by less.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
000
Posts: 4857
Joined: Thu Jul 23, 2020 12:04 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by 000 »

vineviz wrote: Fri Apr 30, 2021 4:44 pm I can't speak for nisiprius, but it looks to me like the use of OPIGX was simply to illustrate a point they were making.

But more broadly, the only advantage a low cost active bond fund has for the investor over a high cost active bond fund is that the investor is overpaying by less.
I think not. Vanguard's active bond funds have beat their benchmarks in risk-adjusted terms for a long time. Not every market is efficient.
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

000 wrote: Fri Apr 30, 2021 4:53 pm Vanguard's active bond funds have beat their benchmarks in risk-adjusted terms for a long time.
This is not true.

Vanguard manages 13 active bond funds with track records > 5 years, and literally NONE of them have a statistically significant positive alpha over the past five years.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
000
Posts: 4857
Joined: Thu Jul 23, 2020 12:04 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by 000 »

vineviz wrote: Fri Apr 30, 2021 5:54 pm
000 wrote: Fri Apr 30, 2021 4:53 pm Vanguard's active bond funds have beat their benchmarks in risk-adjusted terms for a long time.
This is not true.

Vanguard manages 13 active bond funds with track records > 5 years, and literally NONE of them have a statistically significant positive alpha over the past five years.
You need to compare to actually available index funds not hypothetical results. The most obvious example is the High Yield Corporate fund.
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

000 wrote: Fri Apr 30, 2021 8:59 pm
vineviz wrote: Fri Apr 30, 2021 5:54 pm
000 wrote: Fri Apr 30, 2021 4:53 pm Vanguard's active bond funds have beat their benchmarks in risk-adjusted terms for a long time.
This is not true.

Vanguard manages 13 active bond funds with track records > 5 years, and literally NONE of them have a statistically significant positive alpha over the past five years.
You need to compare to actually available index funds not hypothetical results. The most obvious example is the High Yield Corporate fund.
A) We don't "need to compare to actually available index funds" to evaluate a manager's performance. That's one way to do it, but it's not the only way nor is it the best way.

B) In this case, though, it doesn't change the outcome. The only active Vanguard bond fund with anything remotely resembling an edge over competing index funds is Vanguard Emerging Markets Bond Investor (VEMBX).
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Topic Author
LMK5
Posts: 334
Joined: Sat Jan 05, 2008 8:43 pm
Location: Orange County, CA

Re: Are Actively Managed Bond Funds Worth a Look?

Post by LMK5 »

I think a classic example for comparing a straight index fund with an actively-managed fund that's 'juiced" for gains is FTBFX vs. FXNAX. What are your thoughts on these two and which would you say is the best bet on a risk-adjusted basis while also taking expense ratios into consideration?
User avatar
nisiprius
Advisory Board
Posts: 43360
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Are Actively Managed Bond Funds Worth a Look?

Post by nisiprius »

000 wrote: Fri Apr 30, 2021 4:32 pm
nisiprius wrote: Fri Apr 30, 2021 7:09 am the Oppenheimer (now Invesco) Core Bond Fund, OPIGX
Why do people always make comparisons to expensive active funds instead of Vanguard's low cost active bond funds?

Would it be fair to argue against S&P 500 indexing because of S&P 500 index funds charging 2% ER?
The question I was addressing is "are you risking much by considering an actively managed bond fund?"

How badly can an active bond manager mess up?" Is there "tail risk," in the form of innocently and accidentally picking a real stinker? A fund that was taking extraordinary risks that weren't visible to a casual investor?

Does the same possibility exist in bond index funds?

The worst messups I'm aware of in bond index funds are:
Source

Vanguard in 2002 with VBTLX: (index, orange; Fidelity, blue; Vanguard, green);

Image

Embarrassing for Vanguard, not a disaster.

Fidelity in 2007 with FXNAX:

Image

Embarrassing for Fidelity, not a disaster.

Now let's add a couple of actively managed funds to the chart: PIMCO Total Return, the famous actively managed fund that has, in fact, beaten Total Bond without any visible extra risk, despite expenses. And has done so both while Bill Gross was managing it and after his departure. And, we'll add OPIGX.

Image

The chances of actually encountering something like OPIGX are pretty small. But it was a respectable, plain vanilla, core bond fund offered in 401(k)'s, and I don't think the excessive risks it was taking could have been seen by most retail investors.

I say the upside for active management is limited, and in exchange there is some tiny tail risk, of doing reasonable due diligence and picking an OPIGX. For example, if your 401(k) offered OPIGX and no bond index fund, so you'd have had to shuffle things around, opened your own Roth and used it for bonds or something.

Investors should know that OPIGX happened, just as they should know that the Reserve Primary Money Market Fund happened and Schwab YieldPlus happened and the Fidelity Ultrashort Bond Fund happened and the Third Avenue Focused Credit Fund happened. None of them are typical, none of them are likely.

In my personal judgement it's unthinkable that the Vanguard Core Bond Fund would do anything like OPIGX. At the same time, let's be perfectly clear: Vanguard puts Total Bond and Core Bond in the same broad risk category 2, but says that Total Bond has "high" credit quality and that Core Bond only has "medium" credit quality.
Last edited by nisiprius on Sat May 01, 2021 11:56 am, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
backpacker61
Posts: 655
Joined: Wed May 20, 2020 6:36 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by backpacker61 »

I think they're worth a look. I'll be the heretic and say that I also think active equity funds are worth a look. Making these choices doesn't have to be an "all or nothing" type of thing.

I particularly like Vanguard's actively managed duration-specific municipal bond funds (VWIUX, VMLUX, VWALX, etc).
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
thenextguy
Posts: 517
Joined: Wed Mar 25, 2009 12:58 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by thenextguy »

So there’s PIMCO Total Return and DODIX as two bond funds that have smoked Vanguard Total Bond fund even on a risk-adjusted basis for over 30 years. That seems interesting to me. Are there others? Are there any present day equity funds with such performance? Nothing comes to mind.
LivingTheDream
Posts: 80
Joined: Sun Oct 18, 2020 10:30 am
Location: Savannah, GA

Re: Are Actively Managed Bond Funds Worth a Look?

Post by LivingTheDream »

vineviz wrote: Fri Apr 30, 2021 5:54 pm
000 wrote: Fri Apr 30, 2021 4:53 pm Vanguard's active bond funds have beat their benchmarks in risk-adjusted terms for a long time.
This is not true.

Vanguard manages 13 active bond funds with track records > 5 years, and literally NONE of them have a statistically significant positive alpha over the past five years.
vineviz,
I enjoy & respect your posts. Can you please add a little detail on what constitutes a statistically significant alpha? For example, I own VFSUX (short-term corp), and the 3, 5 & 10-yr variance to both category and index seems to me to be significant (I hold it for potential yr 2-3 withdrawals during sustained down market, so the 0.5-1.0% positive variance for 3-yr is what I have been focused on)
Living The Dream
backpacker61
Posts: 655
Joined: Wed May 20, 2020 6:36 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by backpacker61 »

thenextguy wrote: Sat May 01, 2021 11:58 am So there’s PIMCO Total Return and DODIX as two bond funds that have smoked Vanguard Total Bond fund even on a risk-adjusted basis for over 30 years. That seems interesting to me. Are there others? Are there any present day equity funds with such performance? Nothing comes to mind.
Another core bond fund in the category could include WATFX - Western Asset Core Bond I

https://www.morningstar.com/funds/xnas/watfx/quote

or BCOSX - Baird Core Plus Bond Inv

https://www.morningstar.com/funds/xnas/bcosx/quote
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
sycamore
Posts: 2049
Joined: Tue May 08, 2018 12:06 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by sycamore »

nisiprius wrote: Sat May 01, 2021 10:33 am ...In my personal judgement it's unthinkable that the Vanguard Core Bond Fund would do anything like OPIGX. At the same time, let's be perfectly clear: Vanguard puts Total Bond and Core Bond in the same broad risk category 2, but says that Total Bond has "high" credit quality and that Core Bond only has "medium" credit quality.
I would agree with the above. Regarding Total Bond versus Core Bond, they were neck and neck since Core Bond's inception up until April of 2020 but the active fund has since pulled ahead by more than a little bit. Who knows why that was, maybe the managers made a good decision/bet along the way with duration or credit quality? Also, who knows if that improvement will last for more than a few months?

To me, the best to be said about VCOBX is that for a minor increase in volatility, you have a chance at getting more than a corresponding increase in return. I'd rather increase my stock allocation by a few percentage points.

Note: also included in the chart for comparison is Vanguard's intermediate-term investment grade fund (VFIDX), which has much more in corporate bonds and it showed during the March downturn and subsequent comeback.
NoRegret
Posts: 280
Joined: Sat Dec 16, 2017 2:00 am
Location: California

Re: Are Actively Managed Bond Funds Worth a Look?

Post by NoRegret »

nisiprius wrote: Fri Apr 30, 2021 7:20 am I do think anyone considering in active bond funds should be aware of what happened with Bill Gross. He was once lionized as the "bond king" and pre-eminent active manager. For thirty years, his PIMCO Total Return fund outperformed Vanguard Total Bond--possibly in every single year but 2011? without visible evidence of more risk. Within this forum, he was one of those gurus people quoted as absolute truth--"do this or don't do that because Bill Gross says...."

In 2014 he left PIMCO and jointed Janus, where he was set free to use his full abilities to pick any bonds in the world he wanted, unconstrained by having to stay within the tame and timid bounds of a "core" bond fund.

The time period shown is the time period when he was managing it, and it had the name "Janus [Henderson] Global Unconstrained Bond Fund," JUCIX. If your interpretation is that Bill Gross once had skill and suddenly lost it, in a way that's the point. If you go in for an actively managed fund, you somehow have to constantly be judging whether or not the manager is retaining his skill.

Blue: Bill Gross' actively managed "global" bond fund. Orange: (US) bond index fund. Green: International bond index fund.

Source

Image

It is quite possible that indexing is not the optimum bond strategy, but it is well within the range of the reasonable. Active management can go wrong, even in the hands of a champion active manager.
Dan Ivascyn is the real bond king, very low key. He and Alfred Murata are probably the best fixed income managers around today, better than Gundlach imo. By 2014 Bill Gross has probably already lost half of his mind. His fall out with Pimco was both public and ugly. It was reported at the time that Ivascyn led a "coup". Gross landed at Janus because the head of Janus was his erstwhile protege I believe. This is the depth to which Gross has sunk:
https://www.cnn.com/2020/10/27/business ... index.html

PTTRX and PIMIX are examples of premier actively managed bond funds. Pimco has demonstrated impressive persistence of performance.
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade
Northern Flicker
Posts: 7422
Joined: Fri Apr 10, 2015 12:29 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by Northern Flicker »

vineviz wrote: Fri Apr 30, 2021 9:41 pm
000 wrote: Fri Apr 30, 2021 8:59 pm
vineviz wrote: Fri Apr 30, 2021 5:54 pm
000 wrote: Fri Apr 30, 2021 4:53 pm Vanguard's active bond funds have beat their benchmarks in risk-adjusted terms for a long time.
This is not true.

Vanguard manages 13 active bond funds with track records > 5 years, and literally NONE of them have a statistically significant positive alpha over the past five years.
You need to compare to actually available index funds not hypothetical results. The most obvious example is the High Yield Corporate fund.
A) We don't "need to compare to actually available index funds" to evaluate a manager's performance. That's one way to do it, but it's not the only way nor is it the best way.

B) In this case, though, it doesn't change the outcome. The only active Vanguard bond fund with anything remotely resembling an edge over competing index funds is Vanguard Emerging Markets Bond Investor (VEMBX).
There is reasonably solid evidence that active managers of GNMA portfolios beat the GNMA index/market with pretty good consistency, and that has been true of VFIJX.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

thenextguy wrote: Sat May 01, 2021 11:58 am So there’s PIMCO Total Return and DODIX as two bond funds that have smoked Vanguard Total Bond fund even on a risk-adjusted basis for over 30 years.
This is true for DODIX, but not for the PIMCO fund.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

LivingTheDream wrote: Sat May 01, 2021 4:06 pm
vineviz wrote: Fri Apr 30, 2021 5:54 pm
000 wrote: Fri Apr 30, 2021 4:53 pm Vanguard's active bond funds have beat their benchmarks in risk-adjusted terms for a long time.
This is not true.

Vanguard manages 13 active bond funds with track records > 5 years, and literally NONE of them have a statistically significant positive alpha over the past five years.
vineviz,
I enjoy & respect your posts. Can you please add a little detail on what constitutes a statistically significant alpha? For example, I own VFSUX (short-term corp), and the 3, 5 & 10-yr variance to both category and index seems to me to be significant (I hold it for potential yr 2-3 withdrawals during sustained down market, so the 0.5-1.0% positive variance for 3-yr is what I have been focused on)
The goal of performance attribution is to isolate the effects of the manager's selective decisions (e.g sector or security selection) from the effects of the systematic risks to which the fund is exposed. There are several different approaches to performance attribution, sometimes with subtle differences (there are literally books on the topic).

A fixed-income investor without any skill can generally earn higher returns than a benchmark by simply favoring bonds with longer duration than average and/or lower credit quality than average. These bonds have higher expected returns and higher risk, but any investor wishing more exposure to these kinds of bonds can easily get that exposure through low-cost index funds.

In order to judge, then, the risk-adjusted return for an active manager we first control for the systematic risks they are taking and THEN see if there is any excess return after making those controls. The most common way to do this is through a regression, which will attribute most of the bond fund's returns to systematic risks. Any excess return, negative or positive, is the fund's "alpha". That residual is basically an estimate of the manager's skill, adjusted for costs, and gets reported as a mean (average) estimate and a standard deviation. We use those numbers to reach a conclusion about whether the alpha is different from zero with statistical significance.

Unsurprisingly, very few active fund managers demonstrate statistically significant positive alpha. Most who do so in one time period fail to do so in subsequent time periods.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
thenextguy
Posts: 517
Joined: Wed Mar 25, 2009 12:58 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by thenextguy »

vineviz wrote: Sun May 02, 2021 10:41 am
thenextguy wrote: Sat May 01, 2021 11:58 am So there’s PIMCO Total Return and DODIX as two bond funds that have smoked Vanguard Total Bond fund even on a risk-adjusted basis for over 30 years.
This is true for DODIX, but not for the PIMCO fund.
This is where I got that from. Higher total return and higher Sharpe ratio. What did you use to calculate it?
User avatar
vineviz
Posts: 9846
Joined: Tue May 15, 2018 1:55 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by vineviz »

thenextguy wrote: Sun May 02, 2021 11:28 am
vineviz wrote: Sun May 02, 2021 10:41 am
thenextguy wrote: Sat May 01, 2021 11:58 am So there’s PIMCO Total Return and DODIX as two bond funds that have smoked Vanguard Total Bond fund even on a risk-adjusted basis for over 30 years.
This is true for DODIX, but not for the PIMCO fund.
This is where I got that from. Higher total return and higher Sharpe ratio.
Sharpe ratio is not a valid measure of risk-adjusted return for individual funds.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Northern Flicker
Posts: 7422
Joined: Fri Apr 10, 2015 12:29 am

Re: Are Actively Managed Bond Funds Worth a Look?

Post by Northern Flicker »

thenextguy wrote: Sun May 02, 2021 11:28 am
vineviz wrote: Sun May 02, 2021 10:41 am
thenextguy wrote: Sat May 01, 2021 11:58 am So there’s PIMCO Total Return and DODIX as two bond funds that have smoked Vanguard Total Bond fund even on a risk-adjusted basis for over 30 years.
This is true for DODIX, but not for the PIMCO fund.
This is where I got that from. Higher total return and higher Sharpe ratio. What did you use to calculate it?
Some Sharpe ratios. Note also the max drawdowns:

https://www.portfoliovisualizer.com/bac ... tion4_3=45

But you should hold bonds to diversify risk, not as a primary source of return. Once uou establish a risk tolerance, using the higher risk PTTRX or DODIX as a bond allocation requires lowering your equity allocation to compensate for their higher risk:

https://www.portfoliovisualizer.com/bac ... tion4_3=50
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
Dave55
Posts: 1081
Joined: Tue Sep 03, 2013 2:51 pm

Re: Are Actively Managed Bond Funds Worth a Look?

Post by Dave55 »

thenextguy wrote: Sat May 01, 2021 11:58 am So there’s PIMCO Total Return and DODIX as two bond funds that have smoked Vanguard Total Bond fund even on a risk-adjusted basis for over 30 years. That seems interesting to me. Are there others? Are there any present day equity funds with such performance? Nothing comes to mind.
For Bond funds: BCOIX Baird Core Plus Bond Fund since 2002 CAGR 5.44% vs 4.3% for VBTLX Vanguard Total Bond Fund. Both Baird and Dodge and Cox Bond Funds are run by at least 3 co-managers hence less likely of a blowup, as opposed to the 1 person manager model that PIMCO Total Return Bond was when Bill Gross ran it.

Dave
"Reality always wins, your only job is to get in touch with it." Wilford Bion
Post Reply