Home News In print this week

Should investors use active funds or passive ETFs for exposure to bonds?

Ko Ding Wei
Ko Ding Wei7/31/2017 08:00 AM GMT+08  • 8 min read
Should investors use active funds or passive ETFs for exposure to bonds?
(July 31): Actively managed funds posted outflows of US$92.3 billion ($125 billion) last year, according to fund data provider Morningstar, while index funds brought in US$625.2 billion. Their low fees have made index funds popular even as active funds ha
Font Resizer
Share to WhatsappShare to FacebookShare to LinkedInMore Share
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

(July 31): Actively managed funds posted outflows of US$92.3 billion ($125 billion) last year, according to fund data provider Morningstar, while index funds brought in US$625.2 billion. Their low fees have made index funds popular even as active funds have struggled to consistently outperform benchmark indices. And as robo-advisers go mainstream, ETFs are likely to make up an increasingly large proportion of investors’ portfolios.

However, investors should not be too quick to ditch actively managed funds entirely. In particular, investors seeking exposure to the bond market should consider active funds rather than passive ones. Research released by Pacific Investment Management Co ( PIMCO) this year shows that, unlike equity mutual funds, active bond mutual funds have largely outperformed their passive peers after fees.

PIMCO’s study compared the performance of US-listed ETFs and open-end funds available to US-based institutional investors. It found that more than half of the active bond funds and ETFs outperformed their median passive peers in most categories over the past one, three, five, seven and 10 years, with 63% of them outperforming over the past five years. In contrast, only 43% of active equity mutual funds and ETFs outperformed their median passive peers over the past five years.

For more insights on corporate trends...
Sign In or Create an account to access our premium content.
Subscription Entitlements:
Less than $9 per month
Unlimited access to latest and premium articles
3 Simultaneous logins across all devices
Bonus unlimited access to online articles and virtual newspaper on The Edge Malaysia (single login)
×
Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
Subscribe to The Edge Singapore
Get credible investing ideas from our in-depth stock analysis, interviews with key executives, corporate movements coverage and their impact on the market.
© 2022 The Edge Publishing Pte Ltd. All rights reserved.