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February 20, 2024
Holding a diversified portfolio of bonds can bring a high degree of predictability to returns, similar to how an individual bond, if held to maturity, earns its expected yield. Despite a volatile economic and market backdrop throughout 2023, investors who held a diversified portfolio of bonds ended the year earning a return slightly above the year’s starting yield.
The chart below shows the January 2023 starting yield of the Bloomberg US Aggregate Index and the average Core-Plus fund compared to their total return at year-end. In both cases, the difference between the two is less than 0.8%.
Source: Morningstar.
Bond yields remain elevated, near their highest levels since 2008, offering what we view as an attractive entry point for investors. Actively managed core-plus bond funds benefit from exposure to higher yielding areas of fixed income and currently offer yields above 5%. The combination of a diversified bond portfolio and higher yields can offer investors stability and the potential for greater returns.
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Investing involves risk, including the possible loss of principal.
Past performance does not guarantee future results.
Nothing presented should be construed as a recommendation to purchase or sell any security or follow any investment technique or strategy.
The views expressed represent the investment team’s assessment of the market environment as of November 2023, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice.
Charts shown throughout are for illustrative purposes only and not meant to predict actual results.
Chart is for illustrative purposes and is not representative of the performance of any specific investment.
The Bloomberg Municipal Bond Index measures the total return performance of the long-term, investment grade tax-exempt bond market.
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