Welcome to Extreme Investor Network, where we provide you with valuable insights and information to help you make informed investment decisions. Today, we are diving into the world of actively managed bond funds and how they have been outperforming their passive counterparts in the past year.
According to a recent analysis from Morningstar, about 2 out of 3 active bond managers have been able to beat their average passive counterparts over the 12-month period ending in June. In particular, the intermediate core bond category, which consists of funds that invest in investment grade corporates, government bonds, and securitized debt, saw a success rate of 72%.
One of the key factors driving the outperformance of active bond managers has been the interest rate environment. With the Federal Reserve cutting rates, active managers have been able to take advantage of opportunities in the market. Unlike passive bond funds, which tend to have heavier weightings on Treasurys, active managers have the flexibility to explore different investment options and exploit market mispricings for better returns.
As interest rates continue to fall, active managers can adjust their strategies accordingly to position themselves for success. This nimble approach allows them to take advantage of market developments and deliver better relative value to investors.
When shopping for actively managed bond funds, investors should consider both quality and cost. While actively managed funds may have higher expenses due to more trades and management costs, it is important to look for offerings with lower expenses. Additionally, investors should be mindful of the asset classes driving a fund’s higher yields and carefully assess the level of risk involved, especially when it comes to lower grade credit.
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