Have Strategic Bond Funds Delivered on Their Promise?

Flexible bond funds fall under two camps: multisector, income-oriented bond funds; and unconstrained – including absolute return – bond funds

Ashis Dash 7 June, 2017 | 11:50AM
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Fuelled by a hunt for yield and the anxiety over rising rates, the flexible bond fund space took off in the years immediately following the financial crisis. These funds promised to insulate bond-fund investors from traditional bond-market interest-rate risk while providing returns at least in line with core bond funds.

Strategic bond funds tend to have broader, more flexible investment mandates compared to traditional, core corporate and government-bond funds. They are generally conceived as “go-anywhere” funds with the flexibility to invest across global fixed-income markets, including rates, credit, and currencies. Allocations to these markets are usually actively managed, to be able to best exploit investment opportunities, based on the managers' assessment of the prevailing macroeconomic and market environment.

What is a Strategic Bond Fund?

Flexible bond funds fall under two camps: multisector, income-oriented bond funds; and unconstrained – including absolute return – bond funds. While several funds in the first group have been around since before the global financial crisis, the latter group has been a post-crisis phenomenon.

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About Author

Ashis Dash  is a Morningstar Fund Analyst