Why Go Active? Share via LinkedIn Share via Facebook Share via Twitter Share via Email in-page Why active for bonds? Passive may make sense for equities - but bonds are different The median active bond manager has outperformed its passive peer by about 50 bps over the last 10 years – unlike its equity counterpart. These gains may compound over time and can represent meaningful total return potential. 10-year returns of median U.S. active and passive managers Equity Fixed Income Bonds Are Different Structural elements create opportunities for active managers The differences between stocks and bonds, including how they trade, create bond-market specific headwinds for passive strategies – giving active managers more of an edge in fixed income than in equities. Over-the-counter trading: differences in how bonds and equities trade Stocks trade roughly 45 times more than the most liquid investment grade corporate bonds in a day - and the size of those trades are considerably smaller. Typical Trades Per Day Average Trade Size ($) Most Liquid Investment Grade Corp Most Liquid High Yield Corp NYSE/NASDAQ Stocks Why go active now? Lower expected returns makes alpha more important than ever Forward-looking index returns, over a five-year horizon, have historically been closely correlated with the index's yield at the start of each measurement period. By going passive today, your bond portfolio is likely to return today's yield (less than 3%) more or less, minus fees, annually. Correlation between yield and five-year forward looking returns 2011 2016
Why active for bonds? Passive may make sense for equities - but bonds are different The median active bond manager has outperformed its passive peer by about 50 bps over the last 10 years – unlike its equity counterpart. These gains may compound over time and can represent meaningful total return potential.
Bonds Are Different Structural elements create opportunities for active managers The differences between stocks and bonds, including how they trade, create bond-market specific headwinds for passive strategies – giving active managers more of an edge in fixed income than in equities.
Why go active now? Lower expected returns makes alpha more important than ever Forward-looking index returns, over a five-year horizon, have historically been closely correlated with the index's yield at the start of each measurement period. By going passive today, your bond portfolio is likely to return today's yield (less than 3%) more or less, minus fees, annually.