A bond-fund manifesto

It's time for bond funds to tell their owners what they own

Eric Jacobson 20 August, 2009 | 12:31PM
Facebook Twitter LinkedIn

This article from Morningstar.com has generated a lot of interest in the US. It discusses the shortcomings of disclosure for fixed income funds. Investors in the UK and Europe have the same problem--in fact disclosure in markets here is arguably even lighter than in the US. This makes it difficult for investors to choose the right bond fund and existing investors often find it impossible to understand why their fund has performed well or badly. To read up on the five key concepts that every bond fund investor should know, read this article.

In moments of weakness, frustration can slip into anger. Like while sifting through pages of bond-fund reports and factless "fact sheets" trying to grasp a manager's strategy or what kind of market exposure a fund has. Forget about the shareholder letter providing anything useful. If you're lucky you might learn a little about why the fund performed the way it did…during a six-month period that ended two months ago. But detailed explanations of a fund's market bets, or what's driving a manager to make them, are often few and far between.

That opacity makes most bond-fund disclosures nearly useless to the average shareholder. It's true there's a lot of important information in those reports, and there's much more today than there used to be. But if you really want to know how and why a fund is positioned the way it is and what market risks it has, those materials are often woefully inadequate.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Eric Jacobson  is director of fixed-income research with Morningstar.